AUDUSD Forecast: Australia’s headline CPI fell to 1.3% y/y
Australia Inflation data released early in the morning. Australia’s headline CPI fell to 1.3% y/y in Q1, matching the lowest since Q3 2016, led by lower prices for petrol, travel and accommodation. This was the third consecutive quarter where price gains have been below the RBA’s 2-3% target range. The RBA’s trimmed mean CPI rose 1.6% y/y, slipping from +1.8% in Q4.
The RBA in February looked for 1.8%/y for June core inflation, and so a new starting point of 1.4%/y is a significant challenge to the Bank’s rosy core scenario of “returning inflation towards the midpoint of the target.
“Today’s significant downside miss is a game-changer for our on-hold view. The question is when the RBA cuts, not if, given ongoing GDP growth and inflation disappointment. The pickup in core inflation was painfully slow as it was, and now at 1.4%/y has reversed two years of gradual gains.”
0.70200 was our first medium-term target. After AUD CPI Data, the pair tested 0.70200. It is trading at 0.70350 as of writing.
On the upside, two key resistance levels reside at 0.70490 and 0.70800. The selling pressure remains as long as the price stays below 0.70800.
On the downside 0.70200 and 0.70000 are the key supports. Breakout of 0.70000 would send the pair 0.69550.
We will sell potential pullbacks towards 0.70500 – 0.70800.
We have an emerging Bullish Shark pattern at 0.69550. We will use this pattern as a buying opportunity.
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