Australia's inflation surprise: A boon or bane for the AUD?

Greetings traders. In the spotlight today is the AUDUSD currency pair, primarily because the Australian dollar (AUD) and the American dollar (USD) emerged as the two heavyweights in yesterday's trading session. With the AUD taking the top spot and the USD following closely behind, there's certainly a lot unfolding in this forex pair that deserves our attention.

Earlier today, an essential data release concerning the Australian dollar made headlines. Inflation rates in Australia surpassed expectations, registering at 5.6% instead of the anticipated 5.3%. Now, in a typical scenario, a surge in inflation, especially when it exceeds predictions, tends to bolster the respective currency. True to form, the Australian dollar did experience an initial boost post the announcement. However, this enthusiasm was short-lived as the currency began to retreat shortly after.

Upon scrutinizing the technicals of the AUDUSD pair, we identify that the price movements are encapsulated within a 'channel down' formation, depicted by the red lines. At this moment, the price action hints at resistance, as it nudges the upper boundary of this channel. This is corroborated by the formation of a 'shooting star' candlestick pattern. For those versed in technical analysis, this particular candlestick pattern often heralds a potential reversal to the downside, especially when it appears after a rally.

Should today's trading session conclude with the 'shooting star' intact on the daily chart, it paves the way for a bearish narrative. The immediate target to the downside for sellers would be the orange horizontal support. Beyond this level, the pair could further descend to test the lower boundary of the 'channel down' formation. Given the confluence of the inflation data, the initial bullish reaction, and the subsequent bearish price action, the odds seem to lean towards a bearish resolution for the AUDUSD in the near term.