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AUD/USD Breaks Higher on CPI Miss, FOMC Next

AUD/USD Breaks Higher on CPI Miss, FOMC Next

Walker England, Forex Trading Instructor


Talking Points:

The AUD/USD is launching higher this moring, as US CPI figures have come in under expectations. Expectations for US Consumer Price Index (YoY)(MAY) figures were set at 2.0%, but released at an actual 1.9%. This news comes ahead of a stacked economic calendar, that includes today’s U.S. FOMC rate decision. Expectations for this event have been set to see key interest rates raised to 1.25%, however any devication from this expectation may see the US Dollar selloff further.

Technically, the AUD/USD is in a continuing uptrend. The pair remains above both its 10 day EMA (exponential moving average) at .7531 and its 200 day SMA (simple moving average) at .7516. Traders should also note that today’s breakout concluded a 4 day consolidating period for the pair. If prices continue to rally, traders may next look for the AUD/USD to challenge the standing 2017 high at .7749. In the event that the AUD/USD begins to reverse later in the session, traders should first look for prices to first fall back below previous resistance (now support) found at .7567.

AUD/USD Daily Chart with Breakout

(Created Using IG Charts)

Sentiment for the AUD/USD is now attempting to push towards negative extremes. Currently IG Client Sentiment reads at -1.82, which is a significant shift from last week's reading of -1.17. This value suggests that 65% of traders are net-short the market. Typically sentiment is considered a contrarian indicator, which suggests that the AUD/USD may continue to trend higher. In the event of a continued bullish rally, traders should look for IG Client Sentiment to move towards a negative extreme of -2.0 or more. However, if prices begin to reverse later in the session, traders should look for sentiment figures to reverse back towards more neutral values.

Why and how do we use IG Client Sentiment in trading? See our guide.

--- Written by Walker, Analyst for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.