Will AUD/USD Reverse at Resistance Above 0.77?
Skerdian Meta • 2 min read
AUD/USD turned bearish at the beginning of February, after completing the bullish run it started in October. The price fell below 0.66, but on Monday we saw a bullish reversal which ended around 0.6720, where buyers met the 200 SMA (purple) on the daily chart. yesterday the bullish momentum picked up again but it has been weaker in this pair overall, compared to other major currencies, showing that the Aussie will resume declining as soon as USD buyers return.
Yesterday this pair experienced some initial negative movement before bouncing back up. However, this market is expected to continue experiencing high volatility due to the Federal Reserve’s role in bailing out banks, and the current inflationary environment.
The 0.6700-20 zone is important since it has acted as both support and resistance. While the Monday session saw the candlestick test this area, there was significant selling pressure in that level. We also saw some consolidation hich lasted for about a week just above this level before the significant breakdown.
The expectation is that there will be major issues from time to time, and although the Australian dollar looks short-term bullish, it is expected to face selling pressure eventually as the US dollar strengthens in this difficult period. So, we’re keeping a bearish bias overall for this pair, as US inflation remained high yesterday, which means a hawkish FED if the bank run doens’t escalate.
Highlights of the US February 2023 CPI Report
- February CPI YoY 6.0% vs 6.0% expected
- January CPI YoY was +5.5%
- CPI MoM for February +0.4% vs +0.4% expected
- January CPI MoM was +0.5%
- Real weekly earnings -0.4% vs +0.7% prior (revised to +0.3%)
- February CPI excluding food and energy YoY +5.5% vs +5.5% expected
- January CPI ex. food and energy +5.6%
- Core CPI MoM% vs +0.4% exp
- Prior core CPI MoM +0.4%
- Core services ex. shelter +0.43% vs +0.265% prior
There are some people who want to disregard this report because of the bank run and the likelihood the FED will slow down with rate hikes (or stop them altogether) until the dust settles. That’s right in the shortest term but this report is still a big deal for FED policy in May and beyond.