- Australia witnessed a greater-than-expected easing of inflation in October.
- The dollar was weak as data supported expectations for Fed rate cuts.
- On Tuesday, the RBA will likely maintain its key interest rate at 4.35%.
The AUD/USD weekly forecast hints at a somewhat bearish outlook. The Aussie takes a dip as Australia’s easing inflation sets the stage for a more dovish central bank.
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Ups and downs of AUD/USD
The Aussie ended the week in the red, a decline after downbeat inflation data. Notably, Australia witnessed a greater-than-expected easing of inflation in October. Concurrently, core inflation also experienced a slight downturn. This outcome strengthens the argument for the central bank to maintain interest rates in the upcoming week.
Meanwhile, the dollar was weak as data supported expectations for Fed rate cuts. US unemployment claims rose, indicating a softening labor market. Other data showed a decline in US inflation, supporting the call for Fed rate cuts.
Investors also listened to a speech from Powell, where he said the central bank would approach interest rates carefully.
Next week’s key events for AUD/USD
On Tuesday, the Reserve Bank of Australia (RBA) will likely maintain its key interest rate at 4.35%, as per a Reuters poll. Meanwhile, a rate cut will probably not come until the fourth quarter of next year.
Ben Picton, a senior strategist at Rabobank, anticipates no change from the RBA in the upcoming week. However, he suggests they will uphold a hawkish stance, emphasizing the likelihood of rate hikes.
Moreover, there will be a report on Australia’s GDP that will show whether the economy grew. Finally, investors will focus on the US employment report that will likely impact the Fed’s policy outlook.
AUD/USD weekly technical forecast: Bulls face tough resistance at 0.618 Fibonacci
On the technical side, AUD/USD has a bullish bias. The price is climbing higher after breaking above and retesting the 0.6600 key level. Moreover, bulls have confirmed a bullish trend as the price has respected the 22-SMA support and made a higher high and low.
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At the same time, the RSI shows solid bullish momentum near the overbought region. Price action also supports the bullish bias, as bulls make much larger candles than bears. However, bulls face strong resistance as the price has retraced to the 0.618 key fib level. Adding to the resistance is the 0.6700 key level.
The bullish trend will continue if bulls break above this resistance zone next week. Moreover, bulls would have a clear path to the next resistance level at 0.6900. However, if the resistance holds firm, the price will likely reverse to 22-SMA or lower.
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