AUDUSD Rate Capped by 200-Day SMA Ahead of Australia Inflation Report

AUDUSD Rate Capped by 200-Day SMA Ahead of Australia Inflation Report

- in Forex Trading
31
0

Australian Dollar Talking Points

AUDUSD extends the decline from earlier this week as Reserve Bank of Australia (RBA) Governor Philip Lowe strikes a dovish tone, and recent price action raises the risk for a further decline as the rebound from the June-low (0.6832) stalls ahead of the 200-Day SMA (0.7087).

AUDUSD Rate Capped by 200-Day SMA Ahead of Australia Inflation Report

A recent speech by Governor Lowe has weighed on the Australian dollar as the central bank head states that “if demand growth is not sufficient, the Board is prepared to provide additional support by easing monetary policy further.

Image of RBA official cash rate

The comments suggest the RBA will continue to insulate the economy as the US and China, Australia’s largest trading partner, struggles to reach a trade agreement, but it remains to be seen if Governor Lowe & Co. will take additional steps after delivering back-to-back rate cuts as “the underlying foundations of the Australian economy remain strong.

Image of DailyFX economic calendar

With that said, updates to Australia’s Consumer Price Index (CPI) may curb the recent decline in AUDUSD as the headline reading is anticipated to widen to 1.5% from 1.3% annum during the first quarter of 2019. However, a slowdown in the core rate of inflation may produce a mixed reaction, with the Australian dollar at risk of facing headwinds as below-target price growth puts pressure on the RBA to further embark on its rate easing cycle.

In turn, AUDUSD stands at risk of facing a further decline ahead of the Federal Reserve interest rate decision on July 31, and the advance from the June-low (0.6832) may continue to unravel as the exchange rate remains capped by the 200-Day SMA (0.7087).

Keep in mind, the AUDUSD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7087), with the exchange rate marking another failed attempt to break/close above the moving average in July.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

AUD/USD Rate Daily Chart

Image of audusd daily chart

  • The broader outlook for AUDUSD remains tilted to the downside, with the exchange rate still at risk of giving back the rebound from the 2019-low (0.6745) as both price and the Relative Strength Index (RSI) continue to track the bearish formations from late last year.
  • Moreover, the advance from the June-low (0.6832) has sputtered ahead of the Fibonacci overlap around 0.7080 (61.8% retracement) to 0.7110 (78.6% retracement), which lines up with the 200-Day SMA (0.7090), with AUDUSD carving a fresh series of lower highs and lows.
  • In turn, a close below the 0.6950 (61.8% expansion) to 0.6960 (38.2% retracement) region raises the risk for a run at the monthly-low (0.6911), with the next area of interest coming in around 0.6850 (78.6% expansion) to 0.6880 (23.6% retracement).

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

You may also like

How state pension claim can affect how Winter Fuel Payment is paid – do you need to claim?

STATE PENSION age is rising, with it set