Australian Dollar Short-term Outlook: AUD/USD Plunges Post-CPI

Australian Dollar Technical Outlook: AUD/USD Short-term Trade Levels

• Australian Dollar plummets more than 1.8% on hot US inflation data
• AUD/USD sell-off now approaching key support at monthly low- risk for price inflection
• Resistance 6578, 6657/73, 6705/07 (key)– Support 6489/91, 6453, 6399-6403 (key)

The Australian Dollar is poised to mark the largest single-day loss in over a year (March 2023) and the larges daily range since November. A decline of more than 1.8%, prompted by today’s hotter than expected US CPI data, is now approaching key support at multi-month lows. The battle lines are drawn heading into the close of the week. These are the updated targets and invalidation levels that matter on the AUD/USD short-term technical chart.

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Australian Dollar Price Chart – AUD/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView

Technical Outlook: In last month’s Australian Dollar Short-term Outlook we noted that the AUD/USD rally had faltered ahead of confluent resistance , “at 6670/73 – a region defined by the 2008 low-week close (LWC) and the 2019 low. The focus is on this pullback and while the trade remains constructive while within this formation, the immediate advance may still be vulnerable here.” Aussie plunged nearly 2.8% off those highs before rebounding into the April open.

A rally of more than 2.5% off the lows exhausted into uptrend resistance yesterday with today’s post-CPI sell-off erasing the entire monthly gain. Is this a false breakout of the late-December downtrend? The immediate focus is on possible test of key support just lower to determine the fate of the bulls here.

Australian Dollar Price Chart – AUD/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView

Notes: A closer look at Aussie price action shows AUD/USD trading within the confines of an ascending pitchfork formation with the 75% parallel highlighting yesterday’s reversal off uptrend resistance. Today’s decline takes price back below the 200-day moving average with Aussie now testing the objective monthly open at 6514.

Key support / near-term bullish invalidation rests with the February reversal close at 6489/91- losses below this threshold would threaten resumption of the broader downtrend towards the yearly low-day close (LDC) at 6453 and the 78.6% retracement of the October rally / 61.8% Fibonacci extension of the December decline at 6399-6403.

Weekly open resistance is eyed at 6579 and is backed by the 50% retracement / 2008 low-week close / 2019 low at 6657/73. Key resistance is eyed 6705/07- a region defined by the 61.8% retracement of the December sell-off and the 100% extension of the February rally. Ultimately, a breach / close above this threshold would be needed to suggest a more significant reversal is underway / mark resumption of the February uptrend.

Bottom line: Today’s reversal has nearly covered the entire monthly range with the Aussie sell-off now approaching key support near the March / April lows. From a trading standpoint, look to reduce short-exposure / lower protective stops on a stretch towards 6490s- rallies should be capped by the weekly open IF price is heading lower here with a close below this formation needed to fuel the next move. Watch the weekly close here. Review my latest Australian Dollar Weekly Forecast for a closer look at the longer-term AUD/USD technical trade levels.

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Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex