AUD/USD Forecast: RBA to Hike 25 bps Despite Easing Inflation

• The annual increase in the CPI for October was 6.9%, down from 7.3% in September.
• The RBA expected inflation for consumer goods to peak at around 8% this quarter.
• Markets are still betting the RBA will increase the cash rate by 25 basis points.

Today’s AUD/USD forecast is bearish. October saw a slowdown in Australian inflation due to strong drops in the cost of fruits and vegetables and unexpected drops in vacation costs. This unanticipated development could mean that interest rates may not need to rise as much as some had anticipated.

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According to data released by the Australian Bureau of Statistics on Wednesday, the annual increase in the consumer price index (CPI) for October was 6.9%, down from 7.3% in September.

This is a welcome surprise for the Reserve Bank of Australia (RBA), which had to raise interest rates by 275 basis points to a nine-year high of 2.85% to control inflation. Inflation rates for consumer goods were supposed to peak around 8% this quarter, but the RBA may have been too gloomy in its predictions.

The RBA’s December policy meeting comes next week, and markets are still betting it will increase the cash rate by 25 basis points. However, they reduced the anticipated peak for interest rates from 4.20% last month and as high as 3.72% before the CPI release to 3.65%.

AUD/USD key events today

When the ADP nonfarm payrolls and the JOLTs job vacancies data are made public, investors will be able to learn more about the condition of the US labor market. There will also be a GDP report demonstrating the state of the US economy.

Investors will pay special attention to Fed Chair Jerome Powell’s address. This speech will probably provide hints about how monetary policy will develop.

AUD/USD technical forecast: Consolidation at the 30-SMA showing indecision

Looking at the 4-hour chart, we see the price trading slightly below the 30-SMA and the RSI close to 50. Bears are currently slightly ahead of the bulls. However, there is indecision in the market as the price is chopping through the 30-SMA.

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The price also trades within a larger range, with support at 0.6600 and resistance at 0.6778. Therefore, if bears can keep control, the price will likely fall to 0.6600 support. On the other hand, if bulls take over, the price will retest the range resistance.

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