The Australian dollar reacts to economic data very nicely. Yesterday, the A$ enjoyed the good trade balance data and building approvals to rise above 0.77. We cast our doubts about the rise given the upcoming RBA decision.
The Aussie did not wait for its central bank. Retail sales came out flat, worse than 0.4% expected and after a drop of 0.5% last month. In addition, the Australian authorities reported that they will change the composition of the CPI calculation. According to experts, this will imply even lower inflation rates in 2018.
The biggest blow to the strength of the Australian dollar stem from weak quarterly Australian CPI report. While most economists expect Phillip Lowe and his colleagues to hold the rate unchanged on November 8th. However, they may hint about a rate cut in 2018, thus adding pressure on AUD/USD.
The pair dropped some 40 pips and lost the 0.77 level, trading at 0.7670. Support awaits at 0.7640 and is followed by 0.7570. Resistance is at 0.7730.
More: Elliott Wave Analysis: AUDUSD and NZDUSD
Here is how the recent move looks on the chart:
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