AUD/USD Forex Signal: Oversold Ahead of Fed, Australia CPI Data

Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6600.
• Add a stop-loss at 0.6485.
• Timeline: 1-2 days.

Bearish view

• Set a buy-stop at 0.6555 and a take-profit at 0.6625.
• Add a stop-loss at 0.6485.

The Australian dollar has been in a steep freefall in the past few days as concerns about the Australian and Chinese economies continued. The AUD/USD exchange rate dropped in the past nine straight days and is hovering near its lowest swing since May 2nd as traders focus on the upcoming Australian inflation data.

Australia inflation data ahead

The AUD/USD pair will be in the spotlight this week as the Australian Bureau of Statistics (ABS) publishes its quarterly inflation report on Wednesday.

Economists polled by Reuters expect the data to show that the country’s inflation remained steady in the second quarter. The average estimate is that the CPI rose from 3.6% in Q1 to 3.8% in Q2.

On a MoM basis, analysts expect the data to reveal that the CPI rose by 1% in the last quarter. The trimmed and weighted mean CPIs, which exclude key volatile items, is expected to come in at 4.0% and 4.3%.

If economists are accurate, it means that the Reserve Bank of Australia (RBA) will maintain a hawkish tone as other central banks start cutting interest rates. In its most recent meeting, the RBA discussed hiking rates but decided to maintain them intact.

The other big news will be the upcoming Federal Reserve interest rate decision scheduled on Wednesday. This meeting will come out a few days after the US published muted PCE inflation data.

The data revealed that US inflation was cooling, with the core PCE coming in at 2.6% and the headline figure falling to 0.1% on a MoM basis. These numbers mean that the Fed will point to a rate cut in its September meeting.

There will be other important AUD/USD news like the US consumer confidence and JOLTs job openings numbers on Tuesday. Australia will also release its building approvals data on Tuesday.

AUD/USD technical analysis

The Aussie has come under heavy selling despite the potential Fed and RBA divergence on monetary policy. This sell-off has seen the pair flip the 200-day moving average into a resistance point. It has also dropped below the important support level at 0.6575, its lowest point on June 10.

The pair has become oversold, with the Relative Strength Index (RSI) dropping below the oversold level. While this could be a sign that bears are gaining momentum, a likely scenario is where dip buyers come in and push it to the resistance point at 0.6600 ahead of the Fed decision and Australia inflation data.

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