Home AUD/USD: Trading the Australian CPI Oct 2014

AUD/USD: Trading the Australian CPI Oct 2014

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

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

The CPI reading for Q2  dipped to 0.5%, down from 0.6% in Q1. This matched the estimate. There is cause for concern as this marked the third straight quarter that the indicator has softened, pointing to  weaker economic activity. The downward trend is  expected to continue, with the estimate for Q3 standing at 0.4%. Will the indicator surprise the markets and beat the forecast?

Sentiments and levels

US data remains strong overall, led by solid employment numbers. The US economy has been outperforming that of Australia, and the continued divergence in monetary stance between the two countries makes the US dollar a more attractive investment than the Aussie, and could lead to the US dollar resuming its gains at the expense of the Aussie. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.9175, 0.90, 0.8891, 0.8750, 0.8660, and 0.8550.

5 Scenarios

  1. Within expectations: 0.2% to 0.6%. 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: 0.7% to 1.1%: A stronger reading than predicted could push the pair above one resistance line.
  3. Well above expectations: Above 1.1%: 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 lower than expected reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below -0.3%: A reading at zero or in negative territory could result in the pair breaking two or more support levels.

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

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.