Newcomers are sweeping back to the Australian dollar after Australia reported robust consumer inflation numbers that topped forecasts. These figures have calmed fears over aggressive rate cuts from the Reserve Bank of Australia (RBA). As a result, the AUD/USD cross went some distance towards retracing its fall from the year’s high. This shift is representative of a complicated domestic economic growth picture paired with shifting international trade dynamics.
As the market participants adjust to the new data and outlook, a rough patch likely lies ahead for the AUD/USD pair. Analysts think the duo might soon reverse down to retest the 0.6220 interim support point. If luck shines on it, it might even go below the 0.6200 level. On this basis, the next major support is pegged near the 0.6130 zone, which could keep downward pressure brewing.
The Australian CPI results have provided some short-term reprieve for the AUD/USD pair. Now, though, it’s primed to recapture its upward trajectory! That breakout above the 100-day Simple Moving Average (SMA) would be a huge game changer. Now located below the 0.6280 area, this step indicates an intensely optimistic view for the currency pair. Those market analysts who still care to predict the path of least resistance for AUD/USD are currently looking for a move higher.
The upper limit of the short-term trading corridor for AUD/USD sits at the 0.6450-0.6446 zone. This would be the most logical area to receive supporting action, with the market now focusing on a possible break above the 0.6300 level. The 61.8% Fibonacci retracement level around 0.6545 is an important technical target for traders to watch. They are just trying to get back up to the 0.6600 level.
“China and the US have not held consultations or negotiations on the issue of tariffs,” noted Chinese officials, a statement that underscores ongoing trade tensions and their impact on global economic sentiment. Optimism for de-escalation in the US-China trade conflict has underpinned recent AUD/USD strength. This unabashed optimism has provided the buoyant backdrop for its strong advances.
As we make our way through this first trading week, market participants will be glued to technical indicators as well as macroeconomic developments. Beyond that, the next major resistance for AUD/USD comes in near the 0.6650 level. Spot prices probably looking to retake the November swing high, just over 0.6700.
Ultimately, the dynamic between hot domestic inflation data and cold international trade tensions would leave USD/USD at the mercy of risk sentiment. We can call the recent price action of the currency pair a bullish consolidation phase, and we think it’s indicative of continued market resilience in the face of uncertainty.