FxWirePro: AUD/USD rejected at 55-EMA, risks deeper losses as RBA trims inflation forecasts

Refer AUD/USD chart on Trading View

• Aussie on the defensive as the Reserve Bank of Australia trims inflation forecasts.
   
• The RBA trimmed the December 2018 underlying inflation forecast to 1.75 percent and now sees inflation at 2 percent in December 2019 and 2.25 percent in December 2020.
   
• The downward revision of inflation forecasts supports the central bank’s view that there is no strong case for a near-term rate move.
   
• AUD/USD hits 3-week lows at 0.7322, scope for further weakness as technicals remain bearish.
   
• Price action was rejected at 55-EMA and has slipped below 21-EMA at 0.7398. 
   
• The pair is hovering around 61.8% Fib at 0.7327 and finds major trendline support at 0.7312.
   
• Break below will likely see test of 78.6% Fib at 0.7107. We see bearish invalidation only above 55-EMA. 
   
• Focus now on US CPI due today at 12:30 GMT. An above-forecast print will lift the greenback, while a below-forecast print would lead to a broad-based USD sell-off.

Support levels - 0.7310 (trendline), 0.7160 (Dec 23 2016 low), 0.7107 (78.6% Fib)

Resistance levels - 0.7388 (5-DMA), 0.7398 (21-EMA), 0.7445 (55-EMA)

Recommendation: Watchout for break below 0.7310 for further weakness.

FxWirePro Currency Strength Index: FxWirePro's Hourly AUD Spot Index was at -177.511 (Bearish), while Hourly USD Spot Index was at 101.623 (Bullish) at 0520 GMT. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex.