- In October, there was a drop in inflation in Australia.
- Australians have benefited from a weakening greenback.
- Financial markets expect the RBA to keep rates unchanged in December.
In Wednesday’s AUD/USD price analysis, we find that the Australian dollar is showing resilience, rising to a four-month high despite the recent drop in Australian inflation in October. This decline in inflation is primarily attributed to lower commodity prices.
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In particular, the Aussie benefited from a weaker dollar, which fell to its lowest level in over three months. There is growing speculation that the US Federal Reserve may start cutting interest rates early next year.
Meanwhile, Australian inflation data bolsters the case for the RBA to keep rates on hold next week. The monthly consumer price index in October grew at an annual rate of 4.9%, which is a slowdown from September’s 5.6%. Moreover, it was below the market forecast of 5.2%.
Furthermore, the CPI experienced a 0.3% decline in October alone, primarily due to lower prices for gasoline, rent, and vacation travel. At the same time, the shortened average value showed an annual increase of 5.3% in October.
Moody’s Analytics economist Harry Murphy Cruz noted: “There is no bad news for Australia’s October inflation. The lower-than-expected figure is an early Christmas present for households and businesses. What’s more, it spares the Reserve Bank Board of Governors a hike at next week’s meeting.
Still, analysts warn that monthly inflation data heavily favored commodities in the first month of the quarter. However, this did not include price changes for various services. Meanwhile, financial markets expect the Reserve Bank of Australia (RBA) to keep rates on hold in December. However, there is a 50% chance of further growth to 4.60% in the first half of next year.
AUD/USD key events today
- US Gross Domestic Product (GDP) report.
AUD/USD Price Technical Analysis: Potential bounce to 0.6700 if bulls stay strong
On the charts, the Aussie surged to new highs above the key 0.6600 level. This move strengthened the bullish bias by continuing the uptrend. Furthermore, the price is now well above the 30-SMA support and the RSI is overbought.
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If the bulls are still strong after the recent bounce, the price could move to the next resistance level at 0.6700. However, as the RSI is showing overbought conditions, the price could pull back to retest the 30-SMA and the 0.6525 support level. The bullish trend will continue if the bulls respect the 30-SMA support.
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