AUD/USD: Trading the Australian CPI Oct 2013

The Australian CPI (Consumer Price Index), which is released each quarter, is an inflation index which 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 the release of the Australian CPI can affect the direction of AUD/USD.

CPI releases for the past two quarters have  posted  gains of 0.4%. The markets are expecting a much better reading for Q3, with an estimate of a gain of 0.8%. Will the index meet or beat this prediction?

Sentiments and levels

The US dollar showed broad weakness and the Australian dollar took full advantage, posting sharp gains.  Will the greenback rebound this week? Much will depend on the release of Non-Farm Payrolls, which will be released on Tuesday. This key indicator was suspended during the shutdown, so it  could have a strong impact on the movement of AUD/USD. So, the overall sentiment is  neutral on AUD/USD towards this release.

Technical levels, from top to bottom: 0.9828, 0.9751, 0.9670, 0.9556,  0.9428 and 0.9283.

5 Scenarios

1. Within expectations: 0.6% to 1.0%. 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: 1.1% to 1.4%: A stronger reading than predicted could push the pair above one resistance line.
3. Well above expectations: Above 1.4%: An unexpectedly sharp rise in inflation could push AUD/USD upwards, with a second line of resistance at risk.
4. Below expectations: 0.2% to 0.5%: A lower than expected reading could pull the pair downwards, with one support level at risk.
5. Well below expectations: Below 0.2%: A reading at zero or in negative territory could result in the pair breaking two support levels.

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

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