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Lackluster Australia CPI to Keep AUDUSD Rate Under Pressure

Lackluster Australia CPI to Keep AUDUSD Rate Under Pressure

2019-07-31 00:00:00
David Song, Currency Strategist
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Trading the News: Australia Consumer Price Index (CPI)

Updates to Australia’s Consumer Price Index (CPI) may impact the near-term outlook for AUDUSD as the headline reading is projected to increase to 1.5% from 1.3% per annum in the first quarter of 2019.

Image of DailyFX economic calendar

Signs of stick price growth may curb the recent decline in AUDUSD as it encourages the Reserve Bank of Australia (RBA) to revert back to a wait-and-see approach at the next meeting on August 6.

However, the details of the report may do little to curb the recent decline in AUDUSD as the core rate of inflation is expected to narrow to 1.5% from 1.6% during the same period. In turn, a batch of lackluster data prints may drag on the Australian dollar as it puts pressure on the RBA to further embark on its rate easing cycle.

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Impact that the Australia CPI report had on AUD/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

1Q

2019

04/24/2019 01:30:00 GMT

15.%

1.3%

-50

-75

1Q 2019Australia Consumer Price Index (CPI)

AUD/USD 15-Minute Chart

Image of audusd 15-minute chart

Australia’s Consumer Price Index (CPI) narrowed more than expected during the first three months of 2019, with the headline reading slipping to 1.3% from 1.8% per annum in the fourth quarter of 2018. A deeper look at the report showed a similar development for the core rate of inflation, with the trimmed mean index printing at 1.6% versus projections for a 1.7% print.

The Australian dollar struggled to hold its ground following the batch of lackluster data prints, with AUDUSD falling below the 0.7050 area to close the day at 0.7015. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Rate Daily Chart

Image of audusd daily chart

  • Keep in mind,the AUDUSD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7083), with the exchange rate marking another failed attempt to break/close above the moving average in July.
  • In turn, the broader outlook for AUDUSD remains tilted to the downside, with the exchange rate still at risk of giving back the rebound from the 2019-low (0.6745) as both price and the Relative Strength Index (RSI) continue to track the bearish formations from late last year.
  • Moreover, the advance from the June-low (0.6832) has sputtered ahead of the Fibonacci overlap around 0.7080 (61.8% retracement) to 0.7110 (78.6% retracement), which lines up with the 200-Day SMA (0.7083), with the near-term outlook for AUDUSD mired by the recent series of lower highs and lows.
  • The Fibonacci overlap around 0.6850 (78.6% expansion) to 0.6880 (23.6% retracement) sits on the radar, with a break of the June-low (0.6832) raising the risk for a move towards 0.6730 (100% expansion).

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--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

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

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