Australian Dollar Could Recover From Here
Filatov Arthur | Feb 01, 2023 12:00AM ET
Throughout the month of January, the AUD/USD traded consistently higher within a bullish channel after bouncing off the 0.67 round number support level at the start of the year.
While the move higher was primarily driven by the weakness in the DXY, 2 CPI y/y data releases ( inflation growth indicator) and no Reserve Bank of Australia (RBA) interest rate decision provided additional stimulus to the climb higher.
On the 11th of January, the CPI y/y data was released at 7.3% (Forecasted: 7.2% Previous 6.9%). The release of higher than previous data showed that inflation was still growing in Australia for the month of December, despite the RBA's approach of consistently hiking interest rates to the current rate of 3.10%. Price reacted positively as it bounced off the 0.6870 level to trade higher.
Again on the 25th of January, the CPI y/y data was released at 8.4% (Forecast: 7.6% Previous: 7.3%), this time for the month of January. Continual inflation growth signaled to the market to increase bets for further rate hikes to come from the RBA. This time, the price broke through the 0.7045 previous swing-high and near-term resistance to trade strongly to the upside, testing the 0.7140 resistance area (last reached in August 2022).
The next directional movement of the AUD/USD will be highly dependent on the outcome of the US Federal Reserve interest rate decision on 2nd February. (read the DXY analysis in the link below)
Anticipating some downside potential on the AUD/USD, if the US Federal Reserve raises rates without making a comment regarding a slowdown/ pivot, the AUD/USD could break out of the current bullish channel to trade down to the 0.6870 price level.
On the 7th of February, the RBA is due to release its interest rate decision, with current rates at 3.10%, the market expectation is for another rate hike of 25bps.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.