The pair will likely continue rising as buyers target the next key resistance point at 0.7200.
Bullish View
- Buy the AUD/USD and set a take-profit at 0.7200.
- Add a stop-loss at 0.7000.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.7050 and a take-profit at 0.6970.
- Add a stop-loss at 0.7100.
The AUD/USD price soared to the highest level since June 10th of this year after the latest American consumer inflation data. It rose to a high of 0.7110, which was about 6.1% above the lowest level this year.
US Inflation Eases
The AUD/USD price jumped sharply after the US consumer inflation data. According to the Bureau of Labor Statistics (BLS), the headline CPI dropped from 1.3% to 0.0% in July. This decline translated to a year-on-year increase of 8.5%, which was lower than the previous 9.1%.
Core inflation also declined from 0.7% to 0.3%, which was lower than the median estimate of 0.5%. As a result, it remained at 5.9% on an annualized basis. Additional data showed that real earnings rose by 0.5% from the previous -0.9%.
Inflation dropped because of the falling oil prices. Brent and West Texas Intermediate (WTI) has dropped from the year-to-date high of over $135 to below $100. At the same time, gasoline prices declined from the year-to-date high of $5 to a low of $4.
Analysts expect that inflation will continue falling considering that the price of other commodities has also dropped. Lumber has dropped to the lowest level in months. The same is true with others like iron ore and copper.
Therefore, the AUD/USD pair rose since investors expect that the Federal Reserve will slow down on its rate hike policies. It has already hiked by 225 basis points this year and analysts believe that it will hike by 50 basis points in the September meeting.
There will be no economic data from Australia on Thursday. Therefore, focus will be on the upcoming US producer price index (PPI) data. Economists expect the data to show that PPI dropped from 11.3% to 10.4% in July.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair rose to a high of 0.7108 after the strong American inflation data. As it rose, it moved above the important resistance level at 0.7048, which was the highest point on August 1. It has managed to move above the 25-day and 50-day moving averages and the first resistance of the standard pivot point.
Therefore, the pair will likely continue rising as buyers target the next key resistance point at 0.7200. A drop below the support at 0.7050 will invalidate the bullish view.
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