AUD/USD: Trading the Australian CPI

Australian CPI (Consumer Price Index), which is released each quarter, measures the change in the price of goods and services charged to consumers. A reading which is higher than the market forecast is bullish for the Australian dollar.

Here are all the details, and 5 possible outcomes for AUD/USD.

Published on Wednesday at 00:30 GMT.

Indicator Background

Analysts consider CPI one of the most important economic indicators, and an unexpected reading from Australian CPI can quickly affect the direction of AUD/USD.

CPI edged lower to 0.4% in the third quarter, matching the forecast. The  fourth quarter estimate stands at 0.5%.

Sentiments and levels

There are concerns as Donald Trump takes over as president, as his economic policies remain unclear. However, the economy is strong and if inflation levels move higher, we could see the Fed step in with additional rate hikes. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.7938, 0.7835, 0.7691, 0.7513, 0.7427 and 0.7311

5 Scenarios

1. Within expectations: 0.2% to 0.8%. In this scenario, AUD/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
2. Above expectations: 0.9% to 1.3%: A stronger reading than predicted could push the pair above one resistance line.
3. Well above expectations: Above 1.3%: An unexpectedly sharp rise in inflation could push AUD/USD upwards, with two or more lines of resistance at risk.
4. Below expectations: -0.3% to 0.1%: A weak reading could see the pair break below one support level.
5. Well below expectations: Below -0.3%: A  reading deep in negative territory  could result in AUD/USD  breaking below  two or more support levels.

For more on the Aussie, see the AUD/USD forecast.