AUD/USD Forex Technical Analysis – Bulls Could Ride Softer US CPI Data Up to .6760

The Australian Dollar is testing its highest level since September 23 early Friday, following through to the upside, after soaring nearly 3% the previous session.

The catalyst behind the Aussie’s strength is a surprisingly subdued U.S. inflation report that bolstered hopes of slower Federal Reserve rate hikes and fueled demand for risk sensitive currencies and other assets.

At 05:37 GMT, the AUD/USD is trading .6646, up 0.0027 or +0.40%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $65.50, up $1.94 or +3.06%.

Aussie Wipes Out Seven Weeks of Losses

The Australian Dollar erased seven weeks of losses on Thursday after the U.S. reported softer-than-expected consumer inflation. Fed fund futures responded to the CPI by lowering the likely peak for rates by a quarter point to 4.87%, while Treasury yields fell by the most in a decade. The move made the U.S. Dollar a less-attractive investment.

“The CPI fanned expectations that the peak in both core and headline inflation is now behind us this cycle, and that a more moderate inflation landscape lies ahead,” wrote analysts at ANZ.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Thursday when buyers took out .6551. A trade through .6386 will change the main trend to down.

The main range is .6916 to .6170. The AUD/USD is currently trading on the strong side of its retracement zone at .6543 to .6631, making it support.

The AUD/USD is also trading inside a long-term retracement zone, making .6466 major support and .6760 major resistance.

Daily Swing Chart Technical Forecast

Trader reaction to the main Fibonacci level at .6631 will determine the direction of the AUD/USD on Friday.

Bullish Scenario

A sustained move over .6631 will indicate the presence of buyers. If this continues to generate enough upside momentum, we could see a near-term test of the resistance cluster at .6747 to .6760.

Bearish Scenario

A sustained move under .6631 will signal the presence of sellers. This could trigger a pullback into the 50% level at .6543.

Side Notes

The U.S. is on a bank holiday, but traders will still get the opportunity to react to the Preliminary University of Michigan Consumer Sentiment and Inflation Expectations reports at 15:00 GMT.