Audusd drops as US treasury budget deficit rises and inflation ticks up

AUDUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.74%	-47.2 Pips
Week to-date	-0.55%	-35.3 Pips
December	-2.19%	-142.8 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In the United States, the Monthly Treasury Budget Statement reported a greater deficit in November, decreasing significantly to -$367 billion from -$257 billion in October, according to the Bureau of the Fiscal Service. This points to increased government spending or decreased revenues, thereby expanding the budget deficit. Concurrently, the U.S. Consumer Price Index (CPI) inflation rate experienced a slight elevation to 0.3% in November from 0.2% in October. Over a 12-month period, this rate rose marginally to 2.7% from 2.6%, as per the Bureau of Labor Statistics. The CPI inflation rate, excluding food and energy—a volatile measure—remained steady at 0.3% from the previous month. Year-over-year, this value remained unaltered at 3.3%. These inflation measurements suggest a relatively stable environment with modest price increases, maintaining some pressure on consumer purchasing power without significant fluctuations in core inflation components.

The recent economic developments in the U.S. may have influenced the performance of the AUDUSD currency pair. The decline in the U.S. Treasury Budget, reflecting a larger deficit, might negatively impact investor sentiment towards the USD, as it highlights increasing government debt. However, the stable to slightly increasing inflation rate could indicate underlying strength in the U.S. economy, providing some support to the dollar. Given this context, the AUDUSD pair weakened, dropping by 0.74% to 0.63646. The drop could be attributed to a combination of investor reaction to the persistent U.S. budget deficit and nuanced views on inflation metrics. With no major events on the same day to counteract this trend, factors driving the U.S. economic outlook likely played a dominant role in the exchange rate movement.

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What can we expect from AUDUSD today?

AUDUSD on Thursday dropped -0.74% to 0.63646. Price is below 9-Day EMA while Stochastic is falling.

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

Looking ahead for the day, immediate support level is at S1 0.63385 with break below could see further selling pressure towards S2 at 0.63124. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.64293 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.63578 would indicate selling pressure.

For the week to-date, take note that AUDUSD is bearish as the pair posted lower by -0.55%.

Key levels to watch out:

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