AUDUSD Forecast – Tentative Trade Ahead of Aussie CPI, GDP Reports

The Australian Dollar is nearly flat on Tuesday as traders showed little reaction to U.S. economic news and domestic data overnight with the focus on Wednesday’s consumer price index (CPI) and Gross Domestic Product (GDP) reports.

Traders are looking for the CPI report to show yearly inflation at 8.1%, down from the previously reported 8.4%. The slight dip is encouraging news, but with yesterday’s retail sales data showing a 1.9% jump in January, it won’t be enough to stop the Reserve Bank of Australia (RBA) from raising interest rates next month. GDP for the fourth quarter is projected to slow to 2.7% annually, after a robust gain of 5.9% in Q3.

A drop in both consumer inflation and gross domestic product would indicate the RBA is doing its job in slowing economic activity, but it’s not likely to stop the central bank from raising its benchmark interest rate by 25 basis points at its next meeting on March 7.

At 17:00 GMT, the AUDUSD is trading .6728, down 0.0011 or -0.16%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) is at $66.83, up $0.15 or +0.23%.

Daily AUDUSD Technical Analysis

The main trend is down according to the daily swing chart. However, momentum made a slight shift to the upside on Tuesday following the confirmation of yesterday’s closing price reversal bottom.

We’re going to need further confirmation if we’re going to call .6698 a bottom since Monday’s rally may have been fueled by short-covering or position-squaring ahead of Wednesday’s reports rather than new buying.

The nearest upside target is a minor pivot at .6810. The closest support is a long-term retracement zone at .6664 – .6547.

Daily AUDUSD Technical Forecast

Trader reaction to a minor pivot at .6728 is likely to determine the direction of the AUDUSD into the close on Tuesday.

Bearish Scenario

A sustained move under .6728 will indicate the presence of sellers. Taking out the minor bottom at .6698 will indicate the selling is getting stronger with .6664 the next target.

Bullish Scenario

A sustained move over .6728 will signal the presence of buyers. If this move generates enough upside momentum then look for a late session surge into .6810.