AUD/USD Technical Analysis Summary
As of January 28, 2025, the AUD/USD currency pair has experienced a downward trend for two consecutive days, primarily influenced by the anticipation of key inflation data from Australia. This data is critical as it may determine the Reserve Bank of Australia's (RBA) decision on interest rates in their upcoming meeting.
Inflation Data Impact
The quarterly inflation figures are expected to play a pivotal role in shaping market expectations regarding potential interest rate cuts by the RBA. Analysts suggest that a trimmed mean inflation rate of 3.2% year-on-year or lower is necessary to justify market pricing for a rate cut. If inflation exceeds this threshold, it could trigger a short-covering rebound in the AUD/USD pair.
Current Market Positioning
Market sentiment is currently leaning towards a potential rate cut, which adds pressure on the Australian dollar. The average post-pandemic quarterly inflation print has been just below 0.9%, and a drop to 0.7% or less would likely be required to support the case for a rate cut.
Technical Levels
The technical analysis indicates that the 1-day implied volatility band for AUD/USD is notably narrow, especially given the significance of the upcoming inflation report and the Federal Reserve meeting. The price action is currently near the weekly pivot point and S1 levels, which may serve as interim support and resistance levels.
Trading Strategy
For traders, the strategy involves looking for buying opportunities on dips towards the support zone between 0.6223 and 0.6231, with a target to reach the resistance zone between 0.6272 and 0.6278. However, for a substantial bounce in AUD/USD, it is crucial that USD/CNH (US Dollar to Chinese Yuan) shows signs of topping out.
Conclusion
In summary, the upcoming inflation data will be a key driver for the AUD/USD pair, with traders advised to monitor the support and resistance levels closely. A soft inflation print could lead to a rebound, while a stronger print may reinforce bearish sentiment.