AUD/USD's wild ride: central bank decisions stir volatility, key data ahead

[MongiIG]

Central bank moves sparked AUD/USD volatility, ending the week lower. Upcoming consumer and CPI data may steer its next trend.

 

Source: Bloomberg

 

Forex AUD/USD Consumer price index United States dollar Inflation Central bank

Written by: Tony Sycamore | Market Analyst, Australia

 

Publication date: Monday 25 March 2024 07:12

Last week's central bank meetings triggered a roller coaster ride for the AUD/USD, closing down 0.70% at .6514.

The main culprits behind the AUD/USD's wild ride last week were:

• The RBA's dovish tilt at its board meeting on Tuesday.
• Thursday's FOMC meeting, which pointed to a shallow Fed easing cycle.
• A surprise rate cut by the Swiss National Bank on Thursday evening.
• Chinese authorities set a weaker-than-expected USD/CNY fix on Friday, which saw the 7.20 level give way for the first time in 2024.

Whether the AUD/USD can find a trend this week will depend on a data-rich local calendar. It starts with the Westpac Consumer Confidence survey on Tuesday; and rolls into the Monthly CPI indicator on Wednesday before culminating in retail sales data for February, which will be released on Thursday.

What is expected from the monthly CPI indicator (Wednesday, 27 March at 11.30am)

In January, the monthly CPI indicator rose by 3.4% YoY, unchanged from December and below market forecasts of 3.6%. Core inflation, which excludes volatile items, rose by 4.1% YoY easing from 4.2% in December. Annual trimmed mean inflation fell to 3.8% from 4% in December.

The data showed inflation inching towards the RBA's target, but January's CPI, marking the new quarter's start, primarily reflected goods prices, with fewer services costs included.Sticky services inflation has been a key concern and focus for central banks and was highlighted again at this week's RBA board meeting.

"The headline monthly CPI indicator was steady at 3.4 per cent over the year to January, with momentum easing over recent months, driven by moderating goods inflation. Services inflation remains elevated, and is moderating at a more gradual pace," the board said

In February, the monthly CPI indicator is expected to increase to 3.6% YoY due to higher petrol and housing prices; and the unwinding of electricity rebates. This is in line with the RBA's expectations of 3.5% year over year over the quarter.

CPI monthly indicator chart

 

Source: RBA

AUD/USD technical analysis

As viewed on the weekly chart below, the AUD/USD continues its choppy sideways price action within a contracting multi month bearish triangle. Downtrend resistance from the January 2023 .7158 high is at .6795c, and uptrend support from the October 2022 .6170 low is at .6320c. The middle of that range, where the price action would be expected to be most choppy, is at .6557, 20 pips above the current price.

AUD/USD weekly chart

 

Source: TradingView

On the daily chart below, the AUD/USD reversed sharply lower from Thursday's .6634 high before testing uptrend support at .6500c, from the October 2023 .6270 low.

For the week ahead, traders will be watching for a break of support at .6500c as an initial indication that the AUD/USD is set to test the year-to-date low of .6442 before a move towards .6320.

On the upside, the 200-day moving average at .6553 will provide short-term resistance, with a sustained break above here needed to open up a move towards the next layer of resistance at .6625/35.

AUD/USD daily chart

 

Source: TradingView

• ^{Source:TradingView. The figures stated are as of 25 March 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}

 

 

 

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