Audusd drops as Australia inflation expectations fall while US fiscal challenges rise

AUDUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.61%	-39.7 Pips
Week to-date	-1.38%	-90.7 Pips
November	-1.26%	-82.9 Pips

Upcoming key events (London Time)

Wed 11:00 PM AUD RBA Governor Michele Bullock speech
Thu 12:30 AM AUD Labour Force Monthly Employment Change
Thu 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)
Thu 08:00 PM USD Federal Reserve Chair Jerome Powell speech
Fri 01:30 PM USD Monthly Retail Trade (1-mth)

What happened lately

In Australia, the Survey of Consumer Inflationary Expectations for November showed a decrease to 3.8%, down from 4% in October, as reported by the Economic Recap. Moreover, the Australian Bureau of Statistics revealed that the nation’s Wage Price Index for the third quarter remained steady at 0.8% from the previous quarter. These figures reflect a relatively stable inflationary environment and wage growth in the country, potentially reducing upward pressure on prices.

Meanwhile, in the United States, according to the Bureau of Labor Statistics, the Consumer Price Index (CPI) inflation rate excluding food and energy remained unchanged at 0.3% in October, the same as in September. Moreover, the CPI inflation rate experienced a slight increase to 2.6% in October from 2.4% in September. The Treasury Budget Statement indicated a shift from a previous surplus of $64 to a deficit of $257 in October, as per the Bureau of the Fiscal Service. These insights suggest persistent inflationary pressures in the U.S., coupled with increasing fiscal challenges.

The news from both Australia and the U.S. could have various implications on the AUDUSD exchange rate. The decline in Australian consumer inflation expectations, alongside stable wage growth, signals less pressing inflationary challenges compared to the U.S., where inflation shows signs of a modest uptick. With the Treasury budget reflecting a substantial deficit, the U.S. may face continued financial stress. As a result, these contrasting economic indicators could lead to a weakening of the USD against the AUD, potentially providing some upward pressure on the AUDUSD exchange rate. However, this insight should be considered cautiously in light of Governor Michele Bullock’s upcoming speech, the Australian Labour Force change, and key U.S. economic events such as the Producer Price Index and Federal Reserve Chair Jerome Powell’s speech, which could heavily influence the exchange rates further.

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What can we expect from AUDUSD today?

AUDUSD on Wednesday dropped -0.61% to 0.64939. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for AUDUSD looks bearish as the pair posted lower in Wednesday trading session.

Looking ahead for the day, immediate support level is at S1 0.64672 with break below could see further selling pressure towards S2 at 0.64405. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.65460 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.64799 would indicate selling pressure.

For the week to-date, take note that AUDUSD is bearish as the pair posted lower by -1.38%.

Key levels to watch out:

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