Australia’s upcoming inflation data is set to be a key focus for forex traders and investors alike. The market currently prices in a 32% probability of an interest rate hike by the Reserve Bank of Australia (RBA) at the February meeting, with an expected total tightening of around 42 basis points in 2026.

The ASX 200 index experienced a notable drawdown in November following the release of hot inflation data at the end of October. This led to a hawkish repricing of interest rate expectations and prompted a more aggressive stance from the RBA, which even considered the possibility of rate hikes in 2026.

Although the RBA primarily monitors quarterly inflation reports, the release of the monthly Australian inflation figures tomorrow is expected to influence market sentiment. Given current hawkish expectations, a soft inflation report could drive a rally in Australian assets, easing pressure on the ASX 200. Conversely, a hotter-than-expected inflation reading could intensify selling pressure, potentially pushing the index back down to November lows.

Technical analysis of the ASX 200 provides further context for traders. On the daily chart, the index has been trading within a rising channel. From a risk management perspective, buying near the lower trendline offers a favourable risk-to-reward setup with the potential for a rally towards new all-time highs. Conversely, a break below this trendline could see further declines, with a key support level around 8415.

Looking at the 4-hour chart, a downward trendline currently defines the recent pullback towards the lower bound of the channel. Sellers may look to position near this downward trendline with stops just above it, aiming for a move back down to the channel’s lower boundary. Buyers will be watching for a breakout above this trendline to strengthen bullish momentum towards the upper channel boundary.

At the 1-hour level, minor support is visible around 8670. Buyers are likely to continue defending this zone with tight stops below it, targeting a move back to the 4-hour downward trendline. Sellers may wait for a break below this level to accelerate the move down to the channel bottom.

Beyond tomorrow’s Australian inflation data, traders should also note other key upcoming economic releases. These include the US ADP employment report, US ISM Services PMI, and US Job Openings data all due tomorrow. On Thursday, US Jobless Claims figures will be released, followed by the US Non-Farm Payrolls report on Friday, rounding off a busy week for market-moving data.

These events are likely to shape risk sentiment and influence currency movements, making close attention to both Australian and US data essential for forex traders.

Original Source: Giuseppe Dellamotta of investinglive.com