The Australian Dollar is trading at a multi-year low against the U.S. Dollar early Wednesday after U.S. inflation moderated less than traders had expected, keeping the Federal Reserve on course to tighten policy aggressively.
The U.S. Consumer Price Index (CPI) climbed 8.3% on an annual basis in April, easing from 8.5% in March but outstripping the 8.1% estimate of economists. The data suggested inflation may have peaked, but was unlikely to cool quickly and derail the Feds currently monetary policy plans.
At 03:40 GMT, the AUD/USD is trading .6922, down 0.0023 or -0.33%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finished at $68.66, down $0.09 or -0.13%.
The market is fully priced for at least a half percentage point increase to the policy rate at each of the next two Fed decisions, on June 15 and July 27, according to the CME FedWatch Tool. However, the Reserve Bank of Australia (RBA) is taking a much slower path toward normalizing its benchmark interest rate. It plans on a series of 25 basis point rate hikes.
Although we could see a few short-covering rallies by the AUD/USD over the short-run, the longer-term outlook for the Aussie is still bearish.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through the intraday low at .6905 will signal a resumption of the downtrend. A move through .7266 will change the main trend to up.
The minor trend is also down. A trade through .7053 will change the minor trend to up. This will shift momentum to the upside.
The minor range is .7266 to .6905. Its retracement zone at .7086 to .7128 is the nearest resistance.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Thursday is likely to be determined by trader reaction to .6945.
Bearish Scenario
A sustained move under .6945 will indicate the presence of sellers. Taking out .6905 with conviction will indicate the selling pressure is getting stronger. This could trigger an acceleration into the June 30, 2020 main bottom at .6833.
Bullish Scenario
A sustained move over .6945 will signal the return of buyers. If this move generates enough upside momentum then look for a surge into a new minor pivot at .6979.
Sellers could come in on the first test of .6979, but overcoming this level could trigger an acceleration into the minor top at .7053.
