The Australian dollar is showing limited movement in the Tuesday session. In North American trade, AUD/USD is trading at 0.7133, up 0.14% on the day.
Australia CPI on center stage
The Australian dollar has shown limited movement for almost a week. The lack of activity could change early on Wednesday, when Australia releases consumer inflation reports (00:30 GMT). Australian CPI is released on a quarterly basis, which magnifies the impact of each release. In the second quarter, CPI came in at -1.9%, which was the first decline since 2016. This weak figure reflected the severe economic downturn in Australia due to the Covid-19 pandemic. However, the consensus is that inflation will rebound to 1.5 per cent in the third quarter. Trimmed CPI, which excludes the most volatile items which comprise CPI, is projected to post a gain of 0.3%, after a reading of -0.1% in the second quarter. If the inflation numbers are stronger than expected, AUD/USD could break out with gains.
RBA keeping a keen eye on third-quarter CPI
The Reserve Bank of Australia will hold its policy meeting next Tuesday. The central bank is widely expected to trim rates to 0.10% at that meeting, after dropping broad hints in recent weeks of a rate cut. There could be further rate cuts in the works and the bank has even stated that negative rates are an option. Such as move would likely send the Australian dollar to lower ground, since investors are sure to seek alternative assets which pay a better rate of return. Earlier this month, RBA Governor Philip Lowe stated that the central bank was seriously considering a significant form of quantitative easing, and weak inflation numbers would support such a move by the RBA. This means that the upcoming CPI release has added significance for the RBA, ahead of next week’s policy meeting.
- 0.7145 is a weak resistance line. The next resistance line is 0.7167
- We find support at 0.7102. This is followed by support at 0.7081
- The 20-day MA remains relevant
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