AUD/USD Forex Technical Analysis – Light Trade Ahead of US Producer Inflation Data, Fed Minutes

The Australian Dollar is trading nearly flat after touching a two-and-a-half-year low earlier in the session. The catalysts behind the early weakness were concerns about China’s economy, rising geopolitical tensions and a broad risk-off mood. Traders are also bracing for U.S. inflation data and its implications for further Federal Reserve rate hikes.

At 05:00 GMT, the AUD/USD is trading .6271, down 0.0002 or -0.02%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $62.43, up $0.07 or +0.10%.

Domestically speaking, a senior Reserve Bank official said on Wednesday that Australia’s neutral interest rate is probably at least 2.5%. He also added that the level is more of an aid for policy than a goal to achieve.

RBA Assistant Governor Luci Ellis said, “The neutral rate is an important guide rail for thinking about the effect policy might be having.” He further added, “It is not necessarily a prescription for what policy should do.”

Aussie Dollar traders are also bracing for the release of the minutes from the Federal Reserve’s September meeting at 18:00 GMT. While Fed Chairman Jerome Powell has acknowledged that aggressive interest rate increases could be painful, the central bank will continue to charge forward in its fight to lower inflation.

Investors are also looking forward to the U.S. September producer price index, a gauge of final-demand wholesale prices, due to be released by the Bureau of Labor Statistics on Wednesday at 12:30 GMT. Economists surveyed by Dow Jones are expecting headline PPI to increase 0.2%, after declining 0.1% in the previous month.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6240 will signal a resumption of the downtrend. A move through .6548 will change the main trend to up.

Minor resistance comes in at .6394, followed by long-term Fibonacci resistance at .6466.

Daily Swing Chart Technical Forecast

Trader reaction to .6272 is likely to determine the direction of the AUD/USD on Wednesday.

Bullish Scenario

A sustained move over .6272 will indicate the presence of buyers. If this move generates enough upside momentum over the near-term then look for a surge into the minor pivot at .6394, followed by the long-term resistance at .6466.

Bearish Scenario

A sustained move under .6272 will signal the presence of sellers. Taking out the intraday low at .6240 will indicate the selling pressure is getting stronger. This could trigger the start of an acceleration to the downside with the April 3, 2020 main bottom at .5980 the next major target price.

Side Notes

A close over .6272 will form a closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a two-to-three day counter-trend rally. This would likely occur if short-sellers decided to square positions ahead of Thursday’s major U.S. consumer inflation report.