Direction
AUD / USD rebounded strongly after a stronger than expected inflation. Q4 CPI rose 0.8% Q / Q versus a consensus estimate of analysts of 0.5%. This made traders believe that the Reserve Bank of Australia will have to shelf out of the immediate plans of rate cuts to prevent inflation from getting out of hand. Consequently, AUD / USD pushed above 0.886 almost immediately after the news, and has remained fairly stable for the rest of the Asian session. Prices continued rally again during the European session, suggesting that rising prices are not a reflex response and we should not be expecting any immediate withdrawal anytime soon.
Nevertheless, it should be noted that the degree of bullishness is surprising. First, AUD / USD rarely move wildly after announcement of the CPI, and the answer today is one of the largest we've seen in the last two years. In addition, the inflation rate is not very high compared to the previous quarter of 1.2%. Even the degree of surprise is lower than the expectations of the previous quarter was a mere 0.8%. Therefore, it is curious that the upward reaction caused is so great when it actually pales in comparison with the data just before.
Time Table
A plausible explanation for this may be that traders who are / short desire AUD / USD already the saturation point, and the short-squeeze allowed a bullish response to be much exaggerated. Therefore, the long-term trend of the bear that is in line with the weakness of Australian fundamentals still should remain, but the possibility to push current upward to continue is still open, especially as prices have managed to erase Top Channel. If the price managed to push above 0.89 round number, we might even see the bulls potentially hit as high as 0.8925. If 0.89 is not broken, it is unlikely that the momentum provided by a combination of new on the reaction and short squeeze can keep prices afloat for long. Therefore, it is a make or break situation for AUD / USD, clear or 0.89 we can see prices start to fall back towards 0.88 now support and low ceiling possibly channel in the short term. Stochastic is in agreement with the curve Stoch already heavily overbought, hence the decline, the scenarios will also be favored.
Table Daily
daily chart is actually much more optimistic for the bulls, with the potential to hit 0.0 if the new signal of bullish cycle stoch proves to be correct. However, even this will require a similar rupture resistance of 0.89 round number before continuing the bullish targets can be considered. Therefore, we are back to the same short-term problem; failure to break 0.89 will result in potentially bearish rapid retaliation that the Evening Star pattern seen on January 13 will remain intact, pushing prices 0.877 Top Channel and long term
Links :.
GBP / USD - Breaks through resistance at 1.6450
AUD / USD - Surges to a week high near 0.8870
EUR / USD - Crawls back above key 1.3550 level
This article is only for general information purposes. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or its subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
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