AUD/USD: on the defensive, RBA trims inflation forecasts

RBA’s downward revision of inflation forecasts could bolster the already bearish technical setup in the AUD/USD pair.
AUD risks deeper losses if CNY continues to fall.

Omkar Godbole FXStreet Contributor

The AUD/USD pair is trading at a five-day low of 0.7366, having created a bearish outside-day candle yesterday and risks falling further, courtesy of Reserve Bank of Australia’s (RBA) downward revision of the inflation forecasts.

The RBA trimmed the December 2018 underlying inflation forecast to 1.75 percent and now sees inflation at 2 percent in December 2019 and 2.25 percent in December 2020, the central bank’s statement of monetary policy showed.

The downward revision of inflation forecasts adds credence to RBA’s view that there is no strong case for a near-term rate move. The central bank also raised GDP (year average) forecast for 2018 to 3.25% from 3%, however, so far, that has not put a bid under the Aussie.

Further, the AUD is vulnerable to a drop in the Chinese yuan. As a result, the AUD risks posting a negative follow-through to previous day's big bearish outside-day candle - a move which will likely strengthen the bear grip around the Aussie dollar.

AUD/USD Technical Levels

Resistance: 0.7395 (5-day MA), 0.7434 (50-day MA), 0.7453 (previous day’s high)

Support: 0.7348 (Aug. 3 low), 0.7318 (July 20 low), 0.73 (psychological level)

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Neutral	Shrinking
1H	Bullish	Oversold	Expanding
4H	Bearish	Oversold	High
1D	Bullish	Neutral	Shrinking
1W	Bearish	Neutral	Low
Updated Jul 31, 18:00 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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