The Australian Dollar is under pressure on Wednesday after the release of another weak Australian consumer inflation report drove up the chances of a near-term RBA rate cut by the Reserve Bank of Australia (RBA).
According to the Australian Bureau of Statistics (ABS), headline consumer price inflation (CPI) was unchanged in the three months to March, seeing the annual increase slow sharply to just 1.33%, down from 1.78% in the year to December last year.
Traders were anticipating a quarterly increase of 0.2% and year-ended rate of 1.5%.
The Australian financial markets are now pricing in a 25 basis point rate cut next month as a two-in-three chance. A full cut is priced in by July. A second 25 basis point cut is also priced in by February next year. After the final cut, Australia’s cash rate will be at 1%.
At 03:38 GMT, the AUD/USD is trading .7033, down 0.0070 or -0.98%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The main trend turned down earlier today when sellers took out the previous main bottom at .7052. The selling was also strong enough to take out the next main bottom at .7041. The new main top is .7206.
The minor trend is also down. It turned down on Tuesday when sellers took out .7109. This also shifted momentum to the downside.
The main range is .7394 to .6764. Its retracement zone at .7079 to .7153 is controlling the longer-term direction of the Forex pair. Trading below this zone has put the AUD/USD in a weak position.
The short-term range is .6764 to .7296. Its retracement zone at .7030 to .6967 is the next downside target. The AUD/USD is currently testing .7031.
Daily Swing Chart Technical Forecast
Based on the current price at .7035 and the earlier price action, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the 50% level at .7030.
Holding .7030 will indicate the return of buyers. If the buying is strong enough, the AUD/USD could recover the previous main bottoms at .7041 and .7052. This could trigger an acceleration into the major 50% level at .7079.
Taking out and sustaining the move under .7030 will indicate the selling is getting stronger. This could drive the AUD/USD into the next main bottom at .7003. Taking out this level should extend the selling into the short-term Fibonacci level at .6967. This is the trigger point for an even steeper decline into the low of the year at .6764.