Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.700.
- Add a stop-loss at 0.6800.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6843 and a take-profit at 0.6750.
- Add a stop-loss at 0.6935.
The AUD/USD pulled back in the overnight session as the focus shifted to the upcoming American consumer inflation data. It dropped to 0.6865, the lowest point since Thursday last week as investors reacted mildly to the first speech by Jerome Powell.
US inflation data ahead
The AUD/USD price declined slightly after the relatively muted statement by Jerome Powell. In his first speech of the year, Jerome Powell avoided talking about monetary policy. The speech was highly anticipated because it came a few days after the US published the latest jobs numbers.
According to the Bureau of Labor Statistics (BLS), the economy added 225k jobs in December. The jobless rate dropped to 3.5% during the month while wages rose by 4.2%. Therefore, investors were waiting for his statement for signals that the bank will maintain its hawkish tone.
Therefore, investors are now shifting their focus on the upcoming American inflation data. Economists polled by Reuters expect that inflation rose by about 6.5% in December from the previous 7.1%. Core inflation is expected to have dropped from 6.0% to 5.7%.
There is a possibility that inflation figures will be lower than expected. Retailers provided more discounts in December while prices of key commodities like gasoline and natural gas declined during the month.
The AUD/USD pair also pulled back after Australia published the latest retail sales and inflation data. Consumer inflation rose by 4.0% in the fourth-quarter from the previous 6.9% as energy prices remained at an elevated level. Retail sales rebounded modestly in November as holiday shopping started.
The Australian dollar also reacted to a warning by the World Bank that the economy was under strain as inflation remained high. It expects that the economy will expand by 1.7% in 2023, lower than the previous estimate of 3%.
AUD/USD forecast
The AUD/USD pair pulled back in the overnight session as the focus shifted to the upcoming US inflation data. As it dropped, it moved below the important support level at 0.6896, the highest point on December 13. The pair is still above the 50-day moving average and the ascending trendline is shown in black. The MACD is also slightly above the neutral point.
Therefore, the pair will likely resume the bullish trend toward the inflation data. If this happens, it will likely rise to the psychologically important level of 0.700.
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