Australian dollar dips, CPI next

The Australian dollar has reversed directions on Tuesday and recorded slight gains. In the European session, AUD/USD is trading at 0.7781, down 0.22% on the day.

Australian inflation next

Australian CPI showed a strong gain of 0.9% in the fourth quarter, and an identical gain is projected for the first quarter of the year. The economy is performing well, boosted by stronger demand for Australian commodities and ultra-low interest rates. Unemployment has been falling, undeterred by the end of the JobKeeper employment programme at the end of March.

Not surprisingly, inflation is also showing strength, reflective of the positive economic conditions. Consumers are again spending, as Retail Sales rebounded in March with a gain of 1.4%, after a decline of 0.8% beforehand. This beat the forecast of 1.0%. The economy continues to grow after being reopened, and consumer spending is expected to be a key driver in the economic recovery. The RBA is projecting that GDP and employment will reach pre-pandemic levels later in 2021, which is 6-12 months faster than the central bank had expected.

In addition to stronger domestic demand, Australia stands to benefit from a more robust global economy, which will translate into stronger demand for Australian exports. This bodes well for the Australian dollar, which has a tight correlation with commodity prices.

Despite the rosy economic picture, the RBA remains cautious and has not given any indication that it plans to raise interest rates or even taper its QE programme. At its last meeting, the bank noted that inflation remains low and below the central bank’s target, which is between 2-3 per cent. The bank added that although the employment picture has improved, unemployment still remains too high for its liking.

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AUD/USD Technical

  • AUD/USD is putting strong resistance at 0.7813. Above, there is resistance at 0.7887
  • On the downside, there is support at 0.7688, followed by support at 0.7627

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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