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Uptick in Australia Consumer Price Index (CPI) to Stem AUD/USD Losses

Uptick in Australia Consumer Price Index (CPI) to Stem AUD/USD Losses

David Song, Strategist

- Australia Consumer Price Index (CPI) to Climb Annualized 2.0% in 4Q 2017.

- Core Rate of Inflation to Increase 1.9% per Annum.

Trading the News: Australia Consumer Price Index (CPI)

AUD/USD CPI

Updates to Australia’s Consumer Price Index (CPI) may spark a bullish reaction in AUD/USD as the headline and core reading for inflation are expected to pick up during the last three-months of 2017.

Signs of stronger price growth is likely to heighten the appeal of the Australian dollar as it put pressure on the Reserve Bank of Australia (RBA) to lift the cash rate off of the record-low, and Governor Philip Lowe & Co. may start to alter the monetary policy outlook as the central bank head warns that ‘it is more likely that the next move in interest rates will be up, rather than down.’

In turn, a positive development may encourage the RBA to adopt a hawkish tone at the next meeting on February 6, but a string of below-forecast prints may fuel the near-term weakness in AUD/USD as market participants scale back bets for an RBA rate-hike in 2018. Interested in watching the market reaction? Sign up & join DailyFX Currency Strategist Ilya Spivak LIVE to cover the Australia CPI print.

Impact that Australia CPI has had on AUD/USD during the previous quarter

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

4Q

2017

10/24/2017 00:30:00 GMT

2.0%

1.8%

-56

-77

4Q 2017 Australia Consumer Price Index (CPI)

AUD/USD 15-Minute Chart

AUD/USD 15-Minute Chart

Australia’s Consumer Price Index (CPI) unexpectedly slowed to an annualized 1.8% from 1.9% in the second-quarter of 2017, while the core rate of inflation held steady 1.8% amid forecasts for 2.0% print. A deeper look at the report showed prices for non-tradeable goods climbing 3.2% per annum during the three-months through September, while the cost for tradeable goods fell 0.9% during the same period.

The Australian dollar struggled to hold its ground following the below-forecast print, with AUD/USD slipping below the 0.7750 region to end the day at 0.7703. New to trading? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

AUD/USD Daily Chart

AUD/USD Daily Chart

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

  • AUD/USD clings to the upward trend carried over from late last year, with a break/close above 0.8150 (100% expansion) opening up the next topside hurdle around 0.8270 (38.2% retracement).
  • However, the series of failed attempts to break above the 0.8150 (100% expansion) hurdle raises the risk for a near-term pullback especially as the Relative Strength Index (RSI) snaps the bullish formation and appears to coming off of overbought territory.
  • May see the downside targets come back on the radar for AUD/USD as the momentum indicator is on the cusp of flashing a textbook sell-signal, with a move below 0.8030 (38.2% retracement) opening up the 0.7930 (50% retracement) to 0.7940 (61.8% retracement) region, with the next downside hurdle coming in around 0.7850 (38.2% retracement) to 0.7860 (61.8% expansion).

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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