AUD/USD Forecast: Potential for modest gains ahead of US CPI

Matías Salord FXStreet

AUD/USD Current Price: 0.6384

Australian Dollar outperformed on Monday, while DXY failed to hold onto gains.
US Consumer Price Index due on Tuesday is crucial for the USD.
The AUD/USD rises after a five-day negative streak.

The AUD/USD rose after falling for five consecutive days, supported by a weaker US Dollar and increased risk appetite. The pair climbed from the 0.6350 area to 0.6390. Market participants are eagerly awaiting crucial US inflation data.

Following the recent interest rate hike by the Reserve Bank of Australia (RBA), key data releases from Australia are scheduled for this week. The Wage Price Index will be released on Wednesday, and the employment report is due on Thursday. The Westpac Consumer Confidence Index and the National Australia Bank's Business surveys will be published on Tuesday. Market pricing suggests that the central bank is unlikely to raise rates again in December, but this outlook could change with new information.

On Monday, the AUD/USD received a boost from higher equity prices and a rebound in commodity prices. For the pair to maintain its upward momentum, that trend will need to continue. However, the crucial event ahead is the release of the US Consumer Price Index (CPI) for October. Market expectations anticipate a 0.1% increase in October, with the annual rate falling from 3.7% to 3.3%, and the core inflation rate holding at 4.1%. These figures are likely to trigger significant market action.

A higher-than-expected inflation reading could sharply boost the US Dollar, as it would lead the market to consider more seriously another interest rate hike by the Federal Reserve. This comes after Chair Powell mentioned that they are not confident that monetary policy is restrictive enough. On the contrary, if the data shows a slowdown in inflation as expected or slower, the AUD/USD could benefit.

AUD/USD short-term technical outlook

The pair rebounded from the 0.6330 area and climbed to the 55-day Simple Moving Average (SMA) at 0.6392, which acts as resistance. The daily chart does not provide clear indications in the short term, as the price remains within a familiar range, reflected by a flat 20-day SMA.

On the 4-hour chart, the pair attempts to rise above the 20-SMA and shows a bullish bias. Technical indicators offer a bullish perspective ahead of the Asian session, with the Relative Strength Index (RSI) rising towards 50, momentum turning to the upside, and the Moving Average Convergence Divergence (MACD) showing some positive signals for the Aussie. If the pair stays above 0.6420, it could increase the likelihood of testing 0.6440. On the other hand, consolidation below 0.6350 could open the door to a test of 0.6330, with the next target at 0.6310.

Support levels: 0.6350 0.6320 0.6285

Resistance levels: 0.6395 0.6440 0.6470

View Live Chart for the AUD/USD

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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