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AUD/USD Forex Signal: Head and Shoulders Forms Ahead of US CPI Data – 13 December 2022


America’s inflation has been at an elevated level this year because of high energy costs, supply chain challenges, and the ongoing war in Ukraine.

Sell the AUD/USD pair and set a take-profit at 0.6600.Add a stop-loss at 0.6800.Timeline: 1-2 days.

Bullish view

Set a buy-stop at 0.6765 and a take-profit at 0.6850.Add a stop-loss at 0.6650.

The AUD/USD price retreated on Monday and Tuesday morning as the focus remained on the upcoming events in the United States. It dropped to a low of 0.6728, the lowest point since Thursday last week.

US inflation and Fed decision

The Reserve Bank of Australia (RBA) delivered its final interest rate decision of the year. In it, the bank delivered its third straight 0.25% rate hike. It also hinted that it will continue hiking interest rates in the first quarter of the year.

Now, attention shifts to the Federal Reserve decision scheduled for Wednesday. The decision will come a day after the US publishes its consumer price index (CPI) data. Economists expect that America’s inflation eased slightly in November.

The median estimate is that the country’s inflation eased slightly in November. They believe that the broad inflation dropped from 7.7% in October to 7.3% in November. Core inflation, which excludes the volatile food and energy prices, declined to 6.1%.

America’s inflation has been at an elevated level this year because of high energy costs, supply chain challenges, and the ongoing war in Ukraine. Recently, however, there are signs that inflation is easing. Gasoline prices have fallen to about $3.3, the lowest point in months. In a report, Redfin said that America’s house prices are set to tumble in 2023.

Therefore, like the Reserve Bank of Australia, analysts expect that the Fed will start slowing down its interest rate hikes. After hiking by 0.75% in the past four straight meetings, analysts believe that the Fed will hike by 0.50%. This increase will bring the official cash rate by 450 basis points, the biggest yearly increase in decades.

The AUD/USD price also declined as the number of Covid-19 cases in China as the country eased its Covid-zero strategy.

AUD/USD forecast

The AUD/USD price retreated slightly ahead of the US inflation data. It moved below the Woodie pivot point at 0.6780. The pair also moved slightly below the 25-day moving average while the Relative Strength Index (RSI) has moved below the neutral point.

It has also formed a head and shoulders pattern, which is a bearish sign. Therefore, the pair will likely continue falling, with the next key support level being at 0.6600, which is the second support of the Woodie pivot point.

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