AUD/USD opened Monday at 0.71796 and closed Friday at 0.70417, dropping 1379 pips or 1.92%. The pair broke through 71000 support on Friday in its sharpest weekly decline since March.
Wednesday brings US CPI at 12:30 GMT. Markets expect Core CPI to accelerate to 0.5% monthly from 0.4% prior, with the annual rate rising to 2.9% from 2.8%. Any upside surprise could send the dollar higher across the board.
Thursday delivers a double dose of central bank action. The Bank of Canada announces at 13:45 GMT (consensus holds at 2.25%), followed by the ECB at 12:15 GMT where markets price a 25bp hike to 2.40%. Both events create volatility windows for commodity currencies.
If US CPI prints above 0.5% monthly, expect AUD/USD to test Friday's 70371 low. A break below opens the path to 70000. Conversely, a soft inflation reading below 0.3% could see the pair reclaim 71000, with 71433 (last week's Friday high) the next resistance.
The ECB decision adds complexity. A hawkish 25bp hike with guidance for more could weaken the dollar broadly, supporting AUD/USD. But if the ECB signals a pause after this hike, EUR/USD weakness could spill into aussie selling.
LHFX client sentiment shows 47.5% long versus 52.5% short as of Monday morning. The slight short skew suggests traders expect further downside after last week's breakdown. This positioning leaves room for a squeeze higher if US data disappoints.
Three levels matter this week. First, 70371 marks Friday's low and immediate support. Second, the psychological 71000 level now acts as resistance after breaking on Friday. Third, watch 70000 as the next major target if selling accelerates. These are reference points for monitoring price action, not entry signals.
Byline: LHFX Research
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