Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6450.
• Add a stop-loss at 0.6350.
• Timeline: 1 day.

Bearish view

• Set a sell-stop at 0.6388 and a take-profit at 0.6300.
• Add a stop-loss at 0.6450.

The AUD/USD exchange rate pulled back slightly after the latest Federal Reserve minutes. It also retreated as traders waited for the closely-watched US consumer inflation data. It dropped to the important support of 0.6400, much lower than this week’s high of 0.6445.
 

US inflation data ahead

The AUD/USD pair retreated after the Fed published its minutes for its September meeting. The minutes showed that most committee members supported a restrictive monetary policy.

Most of them also supported one more rate hike at a future meeting in a bid to fight the elevated inflation. At the same time, they said that the bank should proceed carefully with future decisions, which will be based on incoming data.

One of the top data to watch will be the upcoming US Consumer Price Index (CPI). Economists have mixed opinions on what to expect in that report. Some analysts believe that inflation rose in September as gasoline prices jumped.

The median estimate is that the headline inflation dropped from 0.6% to 0.3% in September. They also estimate that inflation slipped from 3.7% to 3.6% on a YoY basis.

The core CPI is expected to come in at 0.3% (MoM) and 4.1% (YoY). These numbers will be higher than the Fed’s estimate of 2.0%.

The Fed is also contending with emerging risks in the economy. For example, mortgage rates rose to 8% for the first time in 23 years. Similarly, long-term bond yields have surged to the highest level in years.

The US government is also boosting its spending, which has led to a record deficit of almost $2 trillion. Geopolitical risks have risen after a new war started in Israel. While it is too early to tell, this war could spread in the coming months.
 

AUD/USD technical analysis

The AUD/USD pair has been in a strong uptrend in the past few days. It has formed an ascending channel and moved slightly above the 25-period and 50-period exponential moving averages (EMA). The price retested the lower side of the channel during the US session.

It has also moved slightly above the key support at 0.6357, the lowest swing on September 6th. It is also a few points above the Woodie pivot point. Therefore, the pair will likely resume rising as buyers target the upper side of the channel at 0.6450.

(Click on image to enlarge)

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