AUD/USD price forecast ahead of the monthly CPI release

Wednesday will be a big day for AUD/USD traders for at least two reasons. First, the monthly inflation report is due out. Second, Wednesday is the last trading day of the month.

The inflation report is usually a source of volatility for currencies. That is especially true lately when inflation runs hot in developed countries, and central banks have a hard time bringing it down to their target.

In Australia, the annual inflation is forecast to come out at 6.4%, higher than the previous 6.3%. Hence, from this perspective, the Aussie dollar should trade higher if the forecast is accurate.

So far, May has been a great month for US dollar bulls. The AUD/USD pair, after consolidating in a horizontal channel, dropped below and traded with a weak tone.

But profit-taking ahead of the end of the month is likely to happen. If that is the case, and if inflation comes out hotter than expected, then there is a strong chance for the AUD/USD pair to squeeze higher.

AUD/USD chart by TradingView

A move above 0.66 is what bulls would like to see

Since trading close to 0.72 earlier this year, the AUD/USD exchange rate has declined steadily. It gave back most of the gains since bottoming in late 2022 and recently fell below support in the 0.66 area.

This is the area that should act as a pivotal one. If the market can climb back inside the horizontal channel, thus above 0.66, it signals a reversal.

Speaking of a reversal, an Elliott Waves cycle might complete at current levels. The market corrected more than 61.8% from the 2023 highs, and that is usually a level where bulls start to be interested in a position.

Also, bears will likely book partial profits at this level.

The upcoming trading days left in the month would be interesting for the AUD/USD. The pair is at a level where both bulls and bears have a case. However, the bias is bullish ahead of the inflation report and the end-of-the-month flows.