Home AUD/USD: Trading the Australian CPI

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 1:30 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.

The CPI  edged lower to  0.4% in Q4, within expectations. The markets are expecting the downswing to continue in Q1, with the estimate standing at 0.2%.

Sentiments and levels

US employment numbers continue to impress, and if inflation levels pick up, a June rate hike is a serious possibility. With the RBA still talking about a rate cut, monetary divergence favors the US dollar. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.7886, 0.7798, 0.7692, 0.7597, 0.7438, and 0.7334.

5 Scenarios

  1. Within expectations:-0.1% to +0.5%. 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: 0.6% to 1.0%: A stronger reading than predicted could push the pair above one resistance line.
  3. Well above expectations: Above 1.0%: An unexpectedly sharp rise in inflation could push AUD/USD upwards, with two or more lines of resistance at risk.
  4. Below expectations: -0.2% to -0.6%: A weak reading could see the pair break below one support level.
  5. Well below expectations: Below -0.6%: 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.

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.