AU CPI Release: Shift Trend For AUD?

The AU CPI release today has the potential to change the short-term trend for AUD as a stronger than expected inflation reading could change RBA’s stance on keeping policy accommodative, and considering how much AUD/USD has corrected in the last few months, a strong reaction should follow a strong release…

Here is the current forecast:

9:30pm AU CPI q/q Forecast 0.5% Previous 0.4%
DEVIATION: 0.3% (BUY AUD 0.8% / SELL AUD 0.2%)

The Trade Plan
Here is the plan, if we get a better than expected CPI data, we should see an instant appreciation of AUD by at least of 40 pips within the hour, but if we get a worse than expected number, AUD should drop and we should expect the market to consolidate. Of course, the deviation that I am looking for must be at least 0.3%, or I will skip the after news trade… On a minimum release of 0.8%, I would buy AUD/USD after a decent retracement. If we get a 0.2% or worse release, I’d SELL AUD/USD immediately.

I’d recommend to use the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: AUDUSD.

Outlook Score
Outlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.

Definition
“The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation’s currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.”