AUDUSD Trades Higher as AU CPI Tops Forecast But Fails to Break Resistance
AUDUSD traded higher in today’s Asian session as Australia’s CPI report for Q4 2019 beat expectations. The headline inflation report was expected to print at 0.6%. However, the actual report came in at 0.7% to follow the 0.5% reading for Q3 2019. Meanwhile, the Trimmed CPI report which excludes volatile items like energy, came in as expected at 0.4%.
Consequently, the report pushed AUDUSD higher to 0.6772. The currency pair initially traded around 0.6760 before the release.
A deeper look at the report showed that three factors drove inflation higher. According to Westpac, prices were pushed by “drought, a weaker Aussie, and recovering dwelling prices.” Despite these temporary factors, the bank thinks that the central bank will hold off cutting rates in February because of the report.
The hourly time frame shows that AUDUSD is now testing resistance at the falling trend line (from connecting the highs of January 23 and January 24). Drawing the Fibonacci retracement tool from the high of January 24 to the low of January 28, we can also see that the trend line coincides with the area between the 23.6% and 38.2% Fib levels. Reversal candles around this area could mean that there are still sellers in the market.AUDUSD may soon then fall to support at yesterday’s low at 0.6735.
On the other hand, a strong bullish close above the confluence of resistance around 0.6775 could indicate that AUDUSD is on its way to resistance at a medium-term trend line (from connecting the highs of December 31, January 16, and January 23) around 0.6832. It is likely that the FOMC rate decision later at 7:00 pm GMT will determine the direction of AUDUSD. A dovish Fed could push AUDUSD higher while a hawkish tone could push it lower.More content