AUDUSD Forecast – Sellers Fear US Rates Will Remain Elevated Longer than Previously Expected

The Australian Dollar is edging lower on Wednesday after the head of Australia’s central bank on Wednesday warned of dire consequences of not containing inflation, which is running at three-decade highs.

Traders are also responding to a stronger U.S. Dollar which found some support after stubbornly high U.S. inflation suggested interest rates are going to remain high for longer than investors had expected.

At 03:15 GMT, the AUDUSD is trading .6948, down 0.0038 or -0.55%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $69.23, up $0.32 or +0.46%.

Inflation remains too high in the United States which is prompting Fed officials to insist the central bank will need to keep gradually raising interest rates to beat the price rises. This is helping to underpin the greenback despite expectations of additional rate hikes from the Reserve Bank of Australia (RBA).

“We must remain prepared to continue rate increases for a longer period than previously anticipated,” Dallas Fed President Lorie Logan said on Tuesday.

Daily AUDUSD Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Tuesday, but the lack of follow-through to the upside suggests the move was likely fueled by short-covering and buy stops rather than new buying.

A trade through .7029 will signal a resumption of the uptrend. A move through .6890 will change the main trend to down.

The nearest resistance is a short-term retracement zone at .7007 to .7043. This area stopped the buying on Tuesday at .7029.

The closest support is a minor pivot at .6942, followed by another 50% level at .6893.

Daily AUDUSD Technical Forecast

Trader reaction to the minor pivot at .6942 is likely to determine the direction of the AUDUSD on Wednesday.

Bullish Scenario

A sustained move over .6943 will indicate the presence of buyers. If this creates enough upside momentum then look for a retest of the short-term retracement zone at .7007 to .7043. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .6942 will signal the presence of sellers. This could trigger a break into the support cluster at .6893 – .6890. The latter is a potential trigger for a further break into the main bottom at .6856.

Side Notes

Look for volatility following the release of the U.S. retail sales report at 13:30 GMT. The results of this report could influence Fed policy. A stronger than expected report could pressure the AUDUSD.