Aussie Inflation Data Up Ahead
Although the quarterly inflation print remains the go-to measure for Aussie consumer inflation, the monthly CPI indicator was developed in October 2022 to give policymakers inflation data at a higher frequency.
According to the monthly CPI indicator, inflation slowed to 4.9% in the twelve months to October 2023, easing from 5.6% in September 2023. Tomorrow’s release at 12:30 am GMT will deliver fresh insights into the inflation picture, closely followed by the widely anticipated US CPI inflation release on Thursday. Expectations heading into the event tomorrow are for inflationary pressures to ease to 4.5% (median estimate) in the twelve months to November, a release that supports a disinflationary picture for the Australian economy.
Two Rate Cuts This Year?
As of writing, cash rate futures markets are pricing in a hawkish 50bps of easing for the year for the Reserve Bank of Australia (RBA); the first 25bp rate cut is priced in for the August policy meeting. This, compared to the Fed, is notably hawkish, with only two rate cuts priced as of now for the RBA, as opposed to nearly six for the Fed.
The RBA remains sensitive to inflationary pressures. If Aussie inflation gathers steam and is north of the median estimate (4.5%), an AUD bid could unfold and prompt investors to pare back rate-cut projections further into 2024. Conversely, an expected or lower-than-expected release may weigh on the AUD and bolster the case that the central bank is done and dusted with rate hikes this cycle and back an earlier rate cut than markets currently project.
AUD/USD
The technical situation for the AUD/USD is one that leans in favour of further outperformance.
In the longer term, buyers and sellers have been carving out a symmetrical triangle on the monthly timeframe (commonly referred to as a coil as it is rarely symmetrical), extended from $0.8007 and $0.5506; what’s also technically appealing is December’s (2023) breach of a local descending resistance line, taken from the high of $0.7661. While this year has kicked off on the back foot (-1.5% MTD), last year’s push beyond structure could imply further buying on the AUD/USD. A key technical watch is also the Relative Strength Index (RSI), which is testing the lower side of its 50.00 centreline. A break above would not only indicate positive momentum for the currency pair on the monthly chart, but it would also be the first time north of 50.00 since early 2022.
Meanwhile, across the page on the daily scale, you will note that the price responded from support at $0.6659, a level complemented by a mild Fibonacci cluster and channel support, taken from the low of $0.6339. This was also an area of support expressed in previous analysis.
Technically speaking, this is a buyers’ market for the time being. If the unit remains above current daily support, buyers could potentially target daily resistance as far north as $0.6865.
According to the monthly CPI indicator, inflation slowed to 4.9% in the twelve months to October 2023, easing from 5.6% in September 2023. Tomorrow’s release at 12:30 am GMT will deliver fresh insights into the inflation picture, closely followed by the widely anticipated US CPI inflation release on Thursday. Expectations heading into the event tomorrow are for inflationary pressures to ease to 4.5% (median estimate) in the twelve months to November, a release that supports a disinflationary picture for the Australian economy.
Two Rate Cuts This Year?
As of writing, cash rate futures markets are pricing in a hawkish 50bps of easing for the year for the Reserve Bank of Australia (RBA); the first 25bp rate cut is priced in for the August policy meeting. This, compared to the Fed, is notably hawkish, with only two rate cuts priced as of now for the RBA, as opposed to nearly six for the Fed.
The RBA remains sensitive to inflationary pressures. If Aussie inflation gathers steam and is north of the median estimate (4.5%), an AUD bid could unfold and prompt investors to pare back rate-cut projections further into 2024. Conversely, an expected or lower-than-expected release may weigh on the AUD and bolster the case that the central bank is done and dusted with rate hikes this cycle and back an earlier rate cut than markets currently project.
AUD/USD
The technical situation for the AUD/USD is one that leans in favour of further outperformance.
In the longer term, buyers and sellers have been carving out a symmetrical triangle on the monthly timeframe (commonly referred to as a coil as it is rarely symmetrical), extended from $0.8007 and $0.5506; what’s also technically appealing is December’s (2023) breach of a local descending resistance line, taken from the high of $0.7661. While this year has kicked off on the back foot (-1.5% MTD), last year’s push beyond structure could imply further buying on the AUD/USD. A key technical watch is also the Relative Strength Index (RSI), which is testing the lower side of its 50.00 centreline. A break above would not only indicate positive momentum for the currency pair on the monthly chart, but it would also be the first time north of 50.00 since early 2022.
Meanwhile, across the page on the daily scale, you will note that the price responded from support at $0.6659, a level complemented by a mild Fibonacci cluster and channel support, taken from the low of $0.6339. This was also an area of support expressed in previous analysis.
Technically speaking, this is a buyers’ market for the time being. If the unit remains above current daily support, buyers could potentially target daily resistance as far north as $0.6865.
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