During the initial hours of Wednesday’s trading session, the AUDUSD currency pair experienced a subtle uptick following the release of Australia’s latest CPI data. The monthly CPI indicator revealed a modest contraction to 4.3% from the previous 4.9%, falling short of the 4.4% consensus.
This marked the lowest reading since January 2022, reinforcing the belief in the market that the Reserve Bank of Australia is unlikely to pursue further tightening in its current monetary policy trajectory. However, the landscape shifted yesterday with Australia’s robust retail sales data, surpassing expectations with a noteworthy 2% month-on-month increase, well above the anticipated 1.2%. This, coupled with a renewed appetite for riskier assets, provided a boost to the currency pair. Yet, with the impending US CPI report, the week’s unfolding dynamics remain unpredictable and intriguing.
Technical
On the 4H chart, a descending triangle has emerged as the currency pair entered a consolidation phase following the recent downtrend. Volumes have been declining, suggesting the market is awaiting a catalyst to gauge the future direction, which could come in the form of tomorrow’s CPI release.
The triangle support is established at a psychological demand zone near 0.6678. Should the breakdown occur, the 61.8% Fibonacci golden ratio could be a level of interest at 0.6669. At this level, a retracement of the breakdown could occur. However, if the pair moves lower, the breakdown could be sustained. This could see a test of lower support at 0.6651 and 0.6631.
Alternatively, if the triangle support continues to hold, the bulls face their first hurdle at the 25-SMA (green line) near 0.6705. This converges with the Fibonacci midpoint at the dynamic resistance of the triangle and could prove to be a challenging level to breach. However, if the pair does move higher, the trend reversal could occur toward 0.6720 and 0.6735.
Summary
Despite the Australian inflation data coming in cooler than expected, the trading volume for the AUDUSD currency pair has been subdued as market participants await the crucial US CPI report. The key level to look out for is the triangle support at 0.6678, where the sellers could attempt a breakdown if the data supports their cause.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
