AUDUSD REMAINS STABLE AHEAD OF AUD CPI

• An overview of Inflation in Australia
• Potential effect of today’s reading
• Technical analysis 

AN OVERVIEW OF INFLATION IN AUSTRALIA 

Inflation is an enemy to any economy. Price control as part of Reserve Bank of Australia’s mandate, has been top on the agenda. Given the fact that most central banks are battling with the same subject matter. With the FED tilting to its 2% target, currently at 2.9% as at the last reading, the struggle to achieve the desired target by different central banks continues.

            In Australia, the Consumer Price Index (CPI) serves as a vital tool in tracking fluctuations in the costs of goods and services purchased by consumers. By monitoring this basket of goods and services, the CPI provides valuable insights into inflationary pressures and helps policymakers make informed decisions. It is a key indicator of the overall economic health and stability of the country, offering a comprehensive snapshot of the cost of living for Australian households. Australia's inflation rate climbed to 3.8% year-on-year in Q2 of 2024, rebounding from a recent low of 3.6% in Q1 and meeting market expectations. This marks the first uptick in annual CPI numbers since Q4 of 2022.

Fig. 1 Australian inflation rate – percentage 

Source Australian Bureau of statistics

POTENTIAL EFFECT OF TODAY’S READING

This Wednesday, at 5:30am GMT +4, the Australian Bureau of statistics is set to release her inflation data CPI y/y, and it’s forecasted at 3.4% denoting a 0.4% decline from the previous reading. If we witness a softer inflation, the Reserve Bank of Australia may be inclined to adjust its hawkish stance according to analysts. This could bolster the RBA's confidence in potential rate cuts, as they continue to monitor economic indicators closely. Meanwhile, this could likely make the AUD less attractive for traders and investors. Conversely, If the data is released and it’s greater than 3.4% it would likely make the AUD momentarily attractive and hence we would likely witness a surge on AUDUSD and other pairs where AUD serves as a base currency. Where AUD serves as quote currency, e.g. EURAUD, GBPAUD etc., price would likely decline. 

TECHNICAL ANALYSIS:

AUDUSD on the Four-hour time frame has been overall bullish. The price is currently trading at 0.6779 and it been trapped in-between 0.6760 serving as support, while 0.6798 which is July high serves as resistance. The market is calm and waiting for the next catalyst which is USD CB consumer confidence and of course AUD CPI very early on Wednesday at 5:30am GMT +4 which is our focus. The pair is currently retracing with potential support towards 0.6760. In view of these catalyst (AUD CPI reading), if the data favors AUD, the bullish momentum would likely continue. After the break of 0.6798, the next potential target is 0.6846 which is 29th Dec. 2023 high as per analyst point of view. Meanwhile, if there is a miss in data, the pair would likely decline with potential target at 0.6760 and 0.6697 as per analyst point of view. The place of further breakout or change of trend isn’t out of place.

Fig. 2 AUDUSD, 4H Trading view