Inflation surprised to the upside, and the AUD/USD pair was just one of the USD pairs that reacted promptly. This is one currency pair that benefited from the commodity boom seen in 2021 so far and from the constant rise in the equity markets. Now that they both turn, the AUD/USD looks weak moving forward.
The US inflation data surprised massively to the upside yesterday. Even the core data, the one that doesn’t consider food and energy prices, rose three times more than expected. Effectively, it means that the annualized core inflation is already at 3% when compared to the same period last year, well above the Fed’s 2% inflation target.
However, let’s not forget that the Fed shifted its mandate from 2% to averaging 2% last summer. Also, the Fed has a dual mandate in the sense that it considers job creation besides price stability.
Nevertheless, the spike in inflation is so abrupt that the market starts betting that the Fed will have to taper the asset purchases sooner than planned.
AUD/USD Technical Analysis
The AUD/USD pair forms a head and shoulders pattern on the daily timeframe, visible from the moon. The last daily closing is bearish enough to signal more downside. Bears may want to remain on the short side with a stop at 0.7830 and a target below 0.75.