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AUD/USD Trading - Quarterly inflation - 24 Jan 2017

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AUD/USD trading chart 24 Jan 2017
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Australian inflation expected to rise in Q4 2016

The fourth quarter of 2016 inflation data will be released by the Australian Bureau of Statistics today. Economists are expecting to see the headline inflation rise 0.7% on a quarterly basis, rising at the same pace of 0.7% in the previous quarter. The trimmed mean CPI is expected to rise 0.5%, slightly higher than 0.4% from the previous quarter.

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Australia's fourth quarter inflation data due Wednesday represents the next main hurdle for AUDUSD

If today's data will show that underlying inflation surprised significantly to the downside, then the Reserve Bank of Australia could be forced to lower the benchmark lending rates from 1.50% currently to 1.25% when it meets in February. Some pension institutions already argue that the RBA's growth projection of 3% through 2017 - 2018 is being too optimistic especially after the fourth quarter showed a contraction.

Given the above factors, it is quite possible that AUDUSD which has been in a bullish trend over the past few weeks could come under pressure in the run up to the release of the inflation data which will come out at 23:30 GMT tonight.

How to trade binary

AUDUSD has posted a bearish reversal pattern on the 1-hour chart at 0.7600. The gravestone doji pattern that we see has resulted in the rising trend line being broken. A continuation here could see AUDUSD slide towards the next support at 0.7300.

It is therefore recommended to purchase PUT options in AUDUSD near 0.7570 – 0.7550 for a 21:00 GMT expiry time. The U.S. dollar which has been weaker in the past couple of weeks is started to show signs of a potential reversal which could see AUDUSD look to post a correction to the uptrend.

Asset: AUD/USD
Direction: Put
Target price: 0.7570
Expiry: 21:00 GMT

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