Australian dollar rises as inflation falls, USD awaits key economic data

AUDUSD Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	0.22%	13.3 Pips
Week to-date	0.25%	15.4 Pips
January	-0.72%	-44.7 Pips

Upcoming key events (London Time)

Tue 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)
Wed 01:30 PM USD CPI Inflation Rate (12-mth)

What happened lately

In Australia, the TD Securities Inflation rate for the 12-month period decreased from 2.9% in November to 2.6% in December. This reduction in inflation implies a potential ease in the cost pressures that consumers face. A decrease in inflation can signal a slowdown in economic growth or could result from effective governmental or central bank measures aimed at curbing excessive inflationary pressures. Lower inflation can be a relief for households dealing with cost-of-living pressures, but it can also suggest that economic momentum is softening, possibly impacting consumer and business sentiment negatively.

In the United States, the upcoming economic events include the Producer Price Index (PPI) excluding food and energy sectors, set to be announced on Tuesday at 1:30 PM, and the highly anticipated Consumer Price Index (CPI) Inflation Rate (12-month) scheduled for release on Wednesday at 1:30 PM. These are high-impact economic indicators that provide insights into the cost trends of producers and consumers, and they are influential in shaping Federal Reserve monetary policy decisions. If these data points indicate substantial inflation, it could bolster expectations for a continuation of restrictive monetary policy tactics such as interest rate hikes to manage inflation, potentially supporting the dollar.

The Australian Dollar to US Dollar (AUDUSD) currency pair rose by 0.22% to 0.61744. The decline in Australian inflation may have a dampening effect on the AUD in the longer term as it suggests possible easing of future interest rate hikes by the Reserve Bank of Australia. However, the current uptick in AUDUSD on Monday could be attributed to market anticipation of upcoming U.S. economic data. If the U.S. PPI and CPI figures show higher-than-expected inflation, it might indicate further aggressive monetary tightening by the Federal Reserve, potentially strengthening the USD against the AUD. Traders and investors will be closely monitoring these U.S. inflation readings as they hold significant implications for the future trajectory of the AUDUSD exchange rate.

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What can we expect from AUDUSD today?

AUDUSD on Monday rose 0.22% to 0.61744. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for AUDUSD looks bullish as the pair ended higher after Monday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 0.61934 with break above could target R2 at 0.62124 or figure level area. While towards the downside, we are looking at daily low of 0.61306 as an important support. Break below this level could weaken the current bullish momentum. A break above 0.61810 may suggest continuation after recent positive movement.

For the week to-date, take note that AUDUSD is mixed as compared to the prior week.

Key levels to watch out:

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