The AUD/USD pair once again tested the support level at 0.6290, which corresponds to the lower Bollinger Bands indicator line on the D1 timeframe. Bears in the AUD/USD pair have been challenging this price barrier for three consecutive weeks, starting from early October. On Monday, sellers attempted to establish themselves below the 0.62 level, but their efforts were in vain as it resulted in another failure. Following this, buyers took the initiative. In just one day, the Aussie strengthened by nearly 100 pips. Notably, this price dynamics were driven not only by the overall weakness of the greenback but also by the strength of the Australian dollar. Hawkish statements from RBA Governor Michelle Bullock bolstered the positions of AUD/USD buyers, allowing them to counterattack. However, it is not advisable to rush into long positions in the pair right now, as the fundamental picture for AUD/USD could change dramatically in the very near future.
The Australian dollar is holding its ground due to several factors. Among them is the “Chinese factor.” Macroeconomic reports from China, which had been disappointing market participants since the beginning of the year, turned out better than the expectations of most experts in the autumn. In particular, retail sales in China for September increased by 5.5% YoY, exceeding the forecasted growth of 4.9%. The growth rate of industrial production also pleasantly surprised, with an increase of 4.5%, while experts had predicted a growth of 4.3% (this indicator has been in the “green zone” for the second month in a row). Although China’s economic growth rate slowed down in the third quarter (4.9% compared to 6.3% in the second quarter), it still exceeded forecast estimates (4.4%). China is Australia’s largest trading partner, so these relatively good results provided support to the Aussie.
However, the main driver of AUD/USD growth is the Reserve Bank of Australia (RBA), which maintains a hawkish stance and does not rule out the possibility of further tightening of monetary policy. Despite announcing a pause in raising interest rates, the central bank regularly states that it is prepared to take action if inflation slows down at a slower pace or, even more so, if it starts to accelerate. This idea has been articulated multiple times by Phillip Lowe, confirming these intentions with actions when the RBA raised interest rates again after a pause. Now, this idea is reiterated by Phillip Lowe’s successor, Michelle Bullock.
Speaking at a global markets conference yesterday, the head of the Reserve Bank stated that the RBA’s board “will not tolerate inflation returning to target slower than is expected.” She noted that the regulator is ready, without any hesitation, to raise the interest rate “in case of a significant upward revision of the inflation forecast.” Importantly, Bullock made a significant remark that by the next meeting on November 29, the RBA’s board will have additional information that will allow them to make an appropriate decision.
This information pertains to data on inflation growth in Australia for the third quarter, which is a key report for the RBA. The primary report will be released on Wednesday. On the same day, we will also learn about the Consumer Price Index (CPI) growth for September. However, the main focus will undoubtedly be on the quarterly data. The fate of the Aussie in the medium term will depend largely on these numbers. If the data exceeds expert expectations, the question of a rate hike at the November meeting will remain on the agenda. But if the reports at least meet the forecasted level (let alone fall below it), the Australian dollar will come under significant pressure.
According to the forecasts of most experts, the Consumer Price Index (CPI) in the third quarter is expected to decrease to 5.3% on an annual basis. After reaching its peak in the fourth quarter of 2022 (7.8%), the index has been consistently declining (7.0% in the first quarter of 2023 and 6.0% in the second quarter of 2023). The third quarter should confirm this trend. In quarterly terms, the index also shows a downward trend: in the fourth quarter of 2022, it increased by 1.9%, in the first quarter of this year by 1.4%, and in the second quarter by 0.8%. According to forecasts, in the third quarter, the index is expected to rise slightly to 1.1%. The core inflation index, as reported by the central bank (using the trimmed mean method), is expected to decrease to 5.0% in the third quarter (down from the previous value of 5.5%). As for the September CPI figure, a slight increase is expected to 5.3% (in August, it increased to 5.2%). On one hand, the growth dynamics are minimal, but this could indicate the formation of an upward trend.
It’s worth noting the main points from the minutes of the RBA’s October meeting. The recently published document had a somewhat hawkish tone. The central bank stated that further monetary policy tightening may be required “if inflation turns out to be more persistent than expected.” At the same time, RBA members acknowledged that progress in reducing inflation had slowed, and the RBA board has “low tolerance for inflation returning to target at a slower pace.”
As such, the significance of the inflation report, which will be published on October 25, cannot be overstated. Strong inflation growth could allow the bulls to test the nearest resistance level at 0.6400 (the Kijun-sen line on the daily chart) with a subsequent target of 0.6450 (the lower edge of the Kumo cloud, coinciding with the upper Bollinger Bands line on the same timeframe). However, if inflation slows down more than expected, the bears may once again return to the “price citadel” of 0.6290, which is the lower Bollinger Bands line on the daily chart.
The material has been provided by InstaForex Company – www.instaforex.com
The AUD/USD pair once again tested the support level at 0.6290, which corresponds to the lower Bollinger Bands indicator line on the D1 timeframe. Bears in the AUD/USD pair have been challenging this price barrier for three consecutive weeks, starting from early October. On Monday, sellers attempted to establish themselves below the 0.62 level, but their efforts were in vain as it resulted in another failure. Following this, buyers took the initiative. In just one day, the Aussie strengthened by nearly 100 pips. Notably, this price dynamics were driven not only by the overall weakness of the greenback but also by the strength of the Australian dollar. Hawkish statements from RBA Governor Michelle Bullock bolstered the positions of AUD/USD buyers, allowing them to counterattack. However, it is not advisable to rush into long positions in the pair right now, as the fundamental picture for AUD/USD could change dramatically in the very near future.
The Australian dollar is holding its ground due to several factors. Among them is the “Chinese factor.” Macroeconomic reports from China, which had been disappointing market participants since the beginning of the year, turned out better than the expectations of most experts in the autumn. In particular, retail sales in China for September increased by 5.5% YoY, exceeding the forecasted growth of 4.9%. The growth rate of industrial production also pleasantly surprised, with an increase of 4.5%, while experts had predicted a growth of 4.3% (this indicator has been in the “green zone” for the second month in a row). Although China’s economic growth rate slowed down in the third quarter (4.9% compared to 6.3% in the second quarter), it still exceeded forecast estimates (4.4%). China is Australia’s largest trading partner, so these relatively good results provided support to the Aussie.
However, the main driver of AUD/USD growth is the Reserve Bank of Australia (RBA), which maintains a hawkish stance and does not rule out the possibility of further tightening of monetary policy. Despite announcing a pause in raising interest rates, the central bank regularly states that it is prepared to take action if inflation slows down at a slower pace or, even more so, if it starts to accelerate. This idea has been articulated multiple times by Phillip Lowe, confirming these intentions with actions when the RBA raised interest rates again after a pause. Now, this idea is reiterated by Phillip Lowe’s successor, Michelle Bullock.
Speaking at a global markets conference yesterday, the head of the Reserve Bank stated that the RBA’s board “will not tolerate inflation returning to target slower than is expected.” She noted that the regulator is ready, without any hesitation, to raise the interest rate “in case of a significant upward revision of the inflation forecast.” Importantly, Bullock made a significant remark that by the next meeting on November 29, the RBA’s board will have additional information that will allow them to make an appropriate decision.
This information pertains to data on inflation growth in Australia for the third quarter, which is a key report for the RBA. The primary report will be released on Wednesday. On the same day, we will also learn about the Consumer Price Index (CPI) growth for September. However, the main focus will undoubtedly be on the quarterly data. The fate of the Aussie in the medium term will depend largely on these numbers. If the data exceeds expert expectations, the question of a rate hike at the November meeting will remain on the agenda. But if the reports at least meet the forecasted level (let alone fall below it), the Australian dollar will come under significant pressure.
According to the forecasts of most experts, the Consumer Price Index (CPI) in the third quarter is expected to decrease to 5.3% on an annual basis. After reaching its peak in the fourth quarter of 2022 (7.8%), the index has been consistently declining (7.0% in the first quarter of 2023 and 6.0% in the second quarter of 2023). The third quarter should confirm this trend. In quarterly terms, the index also shows a downward trend: in the fourth quarter of 2022, it increased by 1.9%, in the first quarter of this year by 1.4%, and in the second quarter by 0.8%. According to forecasts, in the third quarter, the index is expected to rise slightly to 1.1%. The core inflation index, as reported by the central bank (using the trimmed mean method), is expected to decrease to 5.0% in the third quarter (down from the previous value of 5.5%). As for the September CPI figure, a slight increase is expected to 5.3% (in August, it increased to 5.2%). On one hand, the growth dynamics are minimal, but this could indicate the formation of an upward trend.
It’s worth noting the main points from the minutes of the RBA’s October meeting. The recently published document had a somewhat hawkish tone. The central bank stated that further monetary policy tightening may be required “if inflation turns out to be more persistent than expected.” At the same time, RBA members acknowledged that progress in reducing inflation had slowed, and the RBA board has “low tolerance for inflation returning to target at a slower pace.”
As such, the significance of the inflation report, which will be published on October 25, cannot be overstated. Strong inflation growth could allow the bulls to test the nearest resistance level at 0.6400 (the Kijun-sen line on the daily chart) with a subsequent target of 0.6450 (the lower edge of the Kumo cloud, coinciding with the upper Bollinger Bands line on the same timeframe). However, if inflation slows down more than expected, the bears may once again return to the “price citadel” of 0.6290, which is the lower Bollinger Bands line on the daily chart.
The material has been provided by InstaForex Company – www.instaforex.com
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