AUD/USD. Key inflation data for February will be published in Australia
March 28, 2023 5:22 pm
The Australian dollar, when paired with the US dollar, shows a fighting spirit, pushing past the 67th figure. The greenback pulls the pair down to the bottom of the 66th figure despite buyers’ continuous attempts to establish a foothold above the target of 0.6700. Despite this, the Australian dollar holds onto optimism by making use of the fundamentally conflicting background.
Tuesday’s Asian trading day saw the release of Australia’s February retail sales figures. One cannot say that the Australian dollar benefited from the release because the indicator showed a negative trend and ended up at 0.2% (after increasing to 1.8% in January). But first, the indicator met expectations, and second, it stayed above zero (for instance, retail sales fell by 4% in December). Overall, it is challenging to identify any cause for optimism in this situation, but the market interpreted the news in its own way, turning the AUD/USD pair around and increasing by more than 50 points. The northern impulse, however, started to weaken at the borders of the 67th figure, and the pair once more laid down in the drift in expectation of the following information impulse.
When we look at the weekly AUD/USD chart and ignore intraday volatility, we can see that the pair has been moving sideways for about a month (since the start of March), trading in a broad price range. Over the previous four weeks, traders were unable to identify the direction of price movement. The price range was slightly wider at the beginning of March (0.6570–0.6770), then it fell to 0.6640–0.6640, but the fact remains that traders continue to circle in response to the current information flow. We are currently seeing another rising trend, which could end tomorrow.
On Wednesday, March 29, Australia will release significant data on inflation growth for February. This is the most crucial macroeconomic release that could cause heightened volatility in the AUD/USD pair. Recall that the RBA commented on the January inflation announcement at its most recent meeting. The monthly consumer price index indicator, according to the central bank, shows that “inflation in Australia has reached its peak.” The CPI in January shocked everyone by falling into the “red zone.” The indicator decreased significantly (to 7.4%) when a decline to 8.1% was expected. The poor growth in fuel and food costs was the cause of the halt in inflationary growth.
Preliminary predictions indicate that the pace of inflation will again slow down in February, to 7.2%. Even if the indicator performs as expected (not to mention in the “red zone”), it will still be feasible to discuss a particular trend that supports the RBA’s belief that Australian inflation has peaked.
It should be noted that the Reserve Bank notably modified the tone of the accompanying statement after the meeting’s outcomes in March, especially by declining to forecast future interest rate rises. Instead, the RBA used more ambiguous language, mentioning simply the potential need for additional monetary policy tightening. The market clearly understood such a spoken signal to mean that the RBA was moderating its stance.
The minutes from the March meeting, which were released last week, only served to affirm the validity of the conclusions drawn. According to the document’s language, the members of the Central Bank decided to review the arguments in favor of a delay at the next meeting, acknowledging that this measure will provide more time to reassess the economy’s prospects.
The protocol also notes that additional monetary policy tightening may be necessary to lower inflation. The regulator emphasized that the Central Bank members will assess information on employment, inflation, retail trade, as well as the general state of the world economy, during the April meeting.
The governor of the RBA, Philip Lowe, commented on the protocol that was published and said that since the PEPP is presently “in a restrictive territory,” the Central Bank is quite near to postponing the rate hike. Although much will depend on macroeconomic data, particularly the dynamics of inflationary growth, he said that a pause may be implemented as early as April.
The upcoming publication of inflation data is crucial for the AUD/USD pair because of this. The likelihood of a pause in the rate hike will increase in several ways, even if the real numbers match the estimate. The outcome of the RBA’s April meeting will be essentially predictable if the report ends up being in the “red zone.”
Conclusions
Trading decisions for the AUD/USD pair should ideally be made immediately after tomorrow’s publication, which could drastically alter the fundamental picture of the pair.
The technique also implies an uncertain scenario. The pair on the D1 timeframe is situated on the Tenkan-sen line and the middle line of the Bollinger Bands indicator. The Ichimoku indicator will produce a bearish “Line Parade” signal and the price will be situated between the middle and lower lines of the Bollinger Bands indicator if the pair fails to break through this resistance level (that is, above the 0.6780 mark) and falls to the 0.6750-0.6760 area. (on the same timeframe). Such negative signs will suggest that short positions should be prioritized. The 0.6560 level, which corresponds to the bottom line of the Bollinger Bands indicator on the daily chart, will be the primary southern target.
The material has been provided by InstaForex Company – www.instaforex.com
The Australian dollar, when paired with the US dollar, shows a fighting spirit, pushing past the 67th figure. The greenback pulls the pair down to the bottom of the 66th figure despite buyers’ continuous attempts to establish a foothold above the target of 0.6700. Despite this, the Australian dollar holds onto optimism by making use of the fundamentally conflicting background.
Tuesday’s Asian trading day saw the release of Australia’s February retail sales figures. One cannot say that the Australian dollar benefited from the release because the indicator showed a negative trend and ended up at 0.2% (after increasing to 1.8% in January). But first, the indicator met expectations, and second, it stayed above zero (for instance, retail sales fell by 4% in December). Overall, it is challenging to identify any cause for optimism in this situation, but the market interpreted the news in its own way, turning the AUD/USD pair around and increasing by more than 50 points. The northern impulse, however, started to weaken at the borders of the 67th figure, and the pair once more laid down in the drift in expectation of the following information impulse.
When we look at the weekly AUD/USD chart and ignore intraday volatility, we can see that the pair has been moving sideways for about a month (since the start of March), trading in a broad price range. Over the previous four weeks, traders were unable to identify the direction of price movement. The price range was slightly wider at the beginning of March (0.6570–0.6770), then it fell to 0.6640–0.6640, but the fact remains that traders continue to circle in response to the current information flow. We are currently seeing another rising trend, which could end tomorrow.
On Wednesday, March 29, Australia will release significant data on inflation growth for February. This is the most crucial macroeconomic release that could cause heightened volatility in the AUD/USD pair. Recall that the RBA commented on the January inflation announcement at its most recent meeting. The monthly consumer price index indicator, according to the central bank, shows that “inflation in Australia has reached its peak.” The CPI in January shocked everyone by falling into the “red zone.” The indicator decreased significantly (to 7.4%) when a decline to 8.1% was expected. The poor growth in fuel and food costs was the cause of the halt in inflationary growth.
Preliminary predictions indicate that the pace of inflation will again slow down in February, to 7.2%. Even if the indicator performs as expected (not to mention in the “red zone”), it will still be feasible to discuss a particular trend that supports the RBA’s belief that Australian inflation has peaked.
It should be noted that the Reserve Bank notably modified the tone of the accompanying statement after the meeting’s outcomes in March, especially by declining to forecast future interest rate rises. Instead, the RBA used more ambiguous language, mentioning simply the potential need for additional monetary policy tightening. The market clearly understood such a spoken signal to mean that the RBA was moderating its stance.
The minutes from the March meeting, which were released last week, only served to affirm the validity of the conclusions drawn. According to the document’s language, the members of the Central Bank decided to review the arguments in favor of a delay at the next meeting, acknowledging that this measure will provide more time to reassess the economy’s prospects.
The protocol also notes that additional monetary policy tightening may be necessary to lower inflation. The regulator emphasized that the Central Bank members will assess information on employment, inflation, retail trade, as well as the general state of the world economy, during the April meeting.
The governor of the RBA, Philip Lowe, commented on the protocol that was published and said that since the PEPP is presently “in a restrictive territory,” the Central Bank is quite near to postponing the rate hike. Although much will depend on macroeconomic data, particularly the dynamics of inflationary growth, he said that a pause may be implemented as early as April.
The upcoming publication of inflation data is crucial for the AUD/USD pair because of this. The likelihood of a pause in the rate hike will increase in several ways, even if the real numbers match the estimate. The outcome of the RBA’s April meeting will be essentially predictable if the report ends up being in the “red zone.”
Conclusions
Trading decisions for the AUD/USD pair should ideally be made immediately after tomorrow’s publication, which could drastically alter the fundamental picture of the pair.
The technique also implies an uncertain scenario. The pair on the D1 timeframe is situated on the Tenkan-sen line and the middle line of the Bollinger Bands indicator. The Ichimoku indicator will produce a bearish “Line Parade” signal and the price will be situated between the middle and lower lines of the Bollinger Bands indicator if the pair fails to break through this resistance level (that is, above the 0.6780 mark) and falls to the 0.6750-0.6760 area. (on the same timeframe). Such negative signs will suggest that short positions should be prioritized. The 0.6560 level, which corresponds to the bottom line of the Bollinger Bands indicator on the daily chart, will be the primary southern target.
The material has been provided by InstaForex Company – www.instaforex.com
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