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AUD/USD Forex Signal: Strong US CPI Shifts the Narrative – 14 September 2022

The AUD/USD pair continued dropping after the latest US inflation data was published on Tuesday.


Bearish View

Sell the AUD/USD pair and set a take-profit at 0.6650.Add a stop-loss at 0.6860.Timeline: 1-2 days.

Bullish view

Set a buy-stop at 0.6785 and a take-profit at 0.6900.Add a stop-loss at 0.0.6650.

The AUD/USD price made a sharp reversal after the latest American inflation data. It retreated to a low of 0.6753, which was the lowest level since September 9. It was also much lower than this week’s high of 0.6920.

US inflation data

The AUD/USD pair continued dropping after the latest US inflation data was published on Tuesday. These numbers had a seismic impact on the financial sector as stocks crashed. The Dow Jones and S&P 500 indices dropped by more than 2% while the 10-year and 30-year bond yields rose to 3.4% and 3.52%.

In the same period, the US dollar index (DXY) rose by more than 1.20% to a high of $109.30. The numbers revealed that America’s inflation was higher than what most analysts were expecting.

Data by the Bureau of Labor Statistics (BLS) revealed that the headline consumer price index (CPI) rose from 0.0% in July to 0.1% in August on a MoM basis. This increase translated to a year-on-year gain of 8.3%, which was higher than the estimated 8.1%.

Core inflation continued rising in August. It rose from 0.3% to 0.6%, leading to a YoY gain of 6.3%. This increase was also bigger than what analysts were expecting. Real earnings dropped by 0.1%.

The implication of these numbers is that the Federal Reserve will continue with its hawkish tone. In the past few weeks, Fed officials like Jerome Powell and Raphael Bostic have insisted that the bank will continue tightening in its bid to lower the soaring inflation.

Therefore, analysts believe that the Fed will hike by either 0.75% or 0.50% when it meets next week. It will also continue with its quantitative tightening policy.

AUD/USD forecast

The AUD/USD pair pulled back sharply in the overnight session. It dropped to a low of 0.6745, which was the first support of the standard pivot point. The pair managed to move below the pivot point and the important resistance level at 0.6860, which was the highest point on September 2. It also moved below the 25-day moving average while the Relative Strength Index (RSI) moved below the neutral point at 50.

Therefore, the pair will likely continue falling as sellers target the next key support level at 0.6650. The stop-loss of this trade will be at 0.6800.

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