AUD/USD: Inflationary Pressures in Australian Economy Eased

AUD/USD did very little last week as the ‘risk on theme’ in the markets were off-set by another report showing inflationary pressures in the Australian economy eased again, making a case for the RBA to continue with their rate cut cycle. PPI increased by 0.2% in the final quarter of last year, down from 0.6% in Q3 and below the 0.3% forecast by experts.

This week the RBA Rate Decision is due for announcement on Tuesday morning. Last time around, the RBA cut their key interest rates by 25 basis points to 3%, the lowest level since April 2009, amid global slowdown and sluggish pace of consumer spending. Since the last rate cut CPI and PPPI have both fallen more than expected, however, inflation is in line with the medium-term target. No change is expected this time around.

Besides the rate decision, there is a host of top tier data for the Australian dollar this week. Retail Sales on Wednesday morning should show an improvement from last month’s decline, whilst an employment report is expected to show an additional 6.1k jobs added last month, but the unemployment rate to tick up to 5.5%.

The week closes on Friday with the RBA Monetary Policy Statement to give us an insight in to the central bank’s economic and monetary policy outlook. Finally, Trade Balance and Inflationary data out of China (Australia’s major trade partner) will cause a stir.

AUD/USD is back below the longer term sloping resistance, but we’re still looking for a break below the 1.3415 key level in order to give short sellers a reason to get involved.

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•AUD/USD was unable to break above 1.0624 key level and as a result, selling has set in.

•Selling has pushed price back below longer term sloping resistance.

•Break of 1.03415 is expected to see price fall to lows of medium term range.

•Support at 1.0341, below brings in to play 1.0149 key level.

•Neutral bias. Bullish above 1.0624. Bearish below 1.0341.