AUDUSD Opens the Door for 0.6350 After the Break on Lower Australian Inflation

AUDUSD slipped below 0.66 this week, as the selling pressure picked up again, with commodity dollars being particularly weak, after the weekend data from China which showed that industrial earnings tumbled by 27% in September, following another major decline in August. The Aussie broke below the 50 weekly SMA as well, which opens the door for 2024 lows at 0.6350 now.

The AUD/USD pair is showing persistent bearish momentum within this month’s 4 cent decline. Immediate resistance is positioned at 0.66, with further obstacles at 0.6620 and 0.6650, levels hindered by a downtrend line that complicates upward movement. Although the weekly chart indicates an oversold stochastic signal, suggesting a potential for a higher reversal, the overall sentiment remains cautiously bearish.

AUD/USD Chart Weekly – the 50 SMA Has Been Broken

Sellers are targeting a level of 0.6350 unless the AUD/USD can break above the descending channel and the $0.6600 mark convincingly. The pair has seen a steady decline this month, losing 4 cents, primarily due to a stronger U.S. dollar and diminished interest in commodity-linked currencies, such as the Australian dollar.

Despite the Reserve Bank of Australia’s (RBA) relatively hawkish stance—reflected in maintaining the Cash Rate steady while other central banks have opted for cuts—the Australian dollar has recently depreciated. This weakening is largely attributed to China’s ongoing economic struggles, coupled with fiscal and monetary stimulus measures that have not met market expectations. We also had the CPIP inflation report from Australia last night.

Australian CPI Inflation Report for September

• September CPI:

  • Headline CPI (year-over-year): 2.8% vs. 2.9% expected, showing a slight deceleration from August’s 3.8% YoY.

• Quarterly CPI (Q3):

  • Quarter-over-quarter: 0.2% vs. 0.3% forecast, down from the prior 1.0% QoQ.

• Trimmed Mean CPI (Core):

  • Year-over-year: 3.5%, matching expectations but slightly lower than the previous 3.9%.
  • Quarter-over-quarter: 0.5% vs. 0.8% expected, marking a decrease from the prior 0.8% QoQ.

The data indicates cooling inflation pressures in Australia, with both headline and core metrics showing slower growth than expected. This decline in core inflation suggests that consumer price pressures are easing, possibly giving the Reserve Bank of Australia more leeway in maintaining or adjusting its current monetary stance. Headline inflation has reached its lowest point since early 2021, largely supported by government interventions like temporary rebates and subsidies.

However, with these support measures scheduled to phase out, inflation is likely to increase again in the upcoming quarters. This expected rise could impact the Reserve Bank of Australia’s policy outlook, especially if underlying price pressures return once the government support fades.

AUD/USD Live Chart