Aussie inflation falls, cementing less hiking sentiment
The Australian dollar fell more against the US dollar on Wednesday, adding to the significant losses seen the day before. Through the first part of the European session, the pair has maintained its offering tone, hovering at the 0.6600 mark, its weakest level as of mid-March.
The headline consumer price index (CPI) fell from 1.9% to 1.4% in the first quarter, the lowest growth since late 2021. This is causing the Aussie to fall across the board.
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Monthly core CPI slowed to 6.1% from 6.6% expected and 6.8% reported in the prior month. In addition, inflation may have reached its high as the annual CPI fell to 7.0% from 7.8%. The Australian dollar was dragged down against the US dollar because the RBA will not feel as much pressure to raise interest rates due to lower inflation.
The US dollar falls as traders tremble before a possible recession
Bearish traders are being restrained from making aggressive wagers on the AUD/USD pair as the US dollar comes under some fresh selling pressure. The greenback lost a large portion of the overnight significant gains.
Bets for an immediate rate decrease by the Fed later this year rise in response to fresh fears about the crisis in the regional banking system, the prospect of an early recession, and concerns over the US debt ceiling.
Market investors anticipate new impetus from the US Durable Goods Orders data, which is scheduled for release today later in the US session. However, attention is still riveted on Friday’s Core PCE Price Index, the Fed’s preferred inflation indicator.
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Thursday’s data on US GDP for Q1 will also be significant for the US dollar. The next leg of the AUD/USD’s directional move will be determined in part by the critical US inflation data, which will affect the short-term price dynamics.
The outlook remains bearish
The bears are keeping up the pressure for a few days now. The pair’s price has been bouncing off the mid term resistance of 0.68.
Currently, the cycle appears to form downward after a relatively sideways or narrow trading zone. The 200 day average of 0.6781 has been broken, generally indicating a downtrend.
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The bears will aim for support levels last seen at the end of last year, around 0.645 if the data will keep supporting the downtrend. Bulls will try to correct here and there, mostly towards the 200 day average, in more positive scenarios toward the previous 0.68 support.
AUD/USD 1D chart, source: tradingview.com, author’s analysis
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