AUD/USD Slides After Australian Inflation Eased in Q1
AUD/USD Analysis
The pair made a poor start to the week on broader risk aversion, as banking fears creeped back in after the troubled US First Republic Bank reported an around 40% decline in deposits, due the fallout of the SVB failure in mid-March. [1]
Today it faces renewed pressure after the Australian CPI report, which showed a moderation in price pressures in the first quarter. Inflation eased to 7% y/y, in the smallest increase in nearly a year and significantly lower than Q4 (7.8%). On a quarterly basis, it decelerated to 1.2%, from 1.4% previously.
The data were released just ahead of next week's policy decision by the Reserve Bank of Australia and not long after its recent pivot. At the beginning of this month, policymakers had paused the rate hike cycle [2], after having delivered tightening of 350 basis points. Although they had kept the door firmly open to more tightening, today's data gives them room to stay on the sidelines at the upcoming meeting.
AUD/USD extends its losses today and having rejected the 38.2% Fibonacci of the 2023 high/low drop, there is increased risk for fresh lows (0.6563). This will expose it to 0.6433, although new catalyst will be required for a breach.
The Aussie tries to find support ahead of this year's low and a recovery towards the EMA100 (0.6670-80) would not be unreasonable. Closes above it would pause the negative momentum, but the upside looks unhospitable, with a thick daily Ichimkou Cloud looming large. A significant and sustained improvement in sentiment would be required to pierce into it and bring 0.6790-0.6806 back in play.
The next leg of the move will likely be determined by Friday's US PCE inflation report, ahead of next week's policy meetings by the RBA and the Fed.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 26 Apr 2023 https://ir.firstrepublic.com/static-files/013f57fb-b980-4353-bbb3-0e7a3b27f20a | |
| Retrieved 27 Sep 2023 https://www.rba.gov.au/media-releases/2023/mr-23-08.html |
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