Aussie Dollar Technical Analysis
- Rising inflation in Australia and Canada remind central banks the fight is not over
- AUD/USD holds around elevated levels but struggles to print new high
- AUD/NZD accelerates further but may soon need a breather
- GBP/AUD eyes swing low as central bank policy is likely to diverge soon
- The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library
Rising Inflation in Australia and Canada Remind Central Banks the Fight is not Over
Restrictive monetary policy the world over has helped rein in inflation but resurgent price pressures have already emerged in developed markets. Canada experienced hotter-than-expected inflation in May, as did Australia – putting their respective central banks on high alert. While Canada’s interest rate peaked at 5%, the Reserve Bank of Australia only deemed it necessary to hike to 4.35% where the rate remains now. Markets assign a little over 40% chance of a rate hike the next time the Bank meets in August with rate cuts being delayed towards the end of next year.
AUD/USD Holds Around Elevated Levels but Struggles to Print New High
AUD/USD looks to test the pre-pandemic low (as resistance) at 0.6680 as the pair holds up. The bullish momentum has appeared to slow down as price action has now made a series of slightly lower highs. In fact, price action has consolidated around 0.6680 and 0.6644.
For a fresh bullish move to be considered, prices would need to take out the swing high at 0.6714 and test the 0.6730 region that kept prices at bay momentarily in December and then again in January this year. 0.6644 could also serve as a tripwire for a pullback. In the event prices head lower from here, the blue 50 day simple moving average becomes dynamic support, followed by the April 2020 level of 0.6580 – which has provided a floor for prices since early May.
AUD/USD Daily Chart
Source: TradingView, prepared by Richard Snow
| Change in | Longs | Shorts | OI |
| Daily | -25% | 27% | -3% |
| Weekly | -20% | 16% | -4% |
AUD/NZD Accelerates Further but May soon need a Breather
AUD/NZD bulls have enjoyed a roughly 200 pip move to the upside since the bullish reversal began at 1.0740. Inflation in Australia has helped the currency rise above the Kiwi dollar as the two nations’ inflation profiles diverge.
1.0885 was surpassed with ease after yesterday’s hotter Australian CPI data and momentum has continued today, albeit at a slower pace. Price action remains bullish, rising above the 50- day and 200-day simple moving averages. However, the pair may find resistance at the swing high of 1.1030 or as a result of the RSI potentially breaching overbought territory. Should bears take control from here, 1.0885 becomes a crucial level of support followed by the 200 SMA (red line)
AUD/NZD Daily Chart
Source: TradingView, prepared by Richard Snow
GBP/AUD Eyes Swing Low as Central Bank Policy is Likely to Diverge Soon
The Bank of England (BoE) pointed towards the August meeting for a potential rate cut after inflation headed lower and growth stagnated in April. The meeting will be accompanied by the BoE forecasts which may help persuade the remaining members of the committee to join the two lonesome members voting in favour of a rate cut. The RBA is headed in the opposite direction – discussing the possibility if a rate hike – meaning the pair may have some way to go to the downside.
The May swing low at 1.8911 is well within view as the pair continues to drop. Thereafter, the July and September low in 2023 comes into focus at 1.8850. Resistance appears at the 50 and 200 SMAs followed by 1.9107 and 1.9185.
GBP/USD Daily Chart
Source: TradingView, prepared by Richard Snow
--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
