The Australian dollar is back below 76 cents after two big, ugly down sessions last week.
“We have the release of the Q3 consumer price index (CPI) data this Wednesday, which is an important data for the local market and the Aussie dollar,” said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader.
“Depending on the CPI numbers, we will see what the Reserve Bank of Australia (RBA) will do or won’t do on interest rates. And that will have an impact on the Aussie dollar.”
According to McKenna, “A strong CPI may offer another opportunity for the Aussie bulls to test overhead resistance again.”
Late last week, the Aussie did a reversal after it hit the 77 cents mark.
But while the reversal off 77 cents again reinforced the broad 0.7450/0.7750 range the AUDUSD has been in for some time, the Aussie is lagging commodities a little at present, McKenna noted.
On a week when the US dollar was substantially stronger that’s not a terrible performance and arguably it was only the rubbery jobs data last Thursday that was the catalyst for the collapse.
That appears doubly the case when you consider the past few month’s correlation between movements in the Aussie dollar, crude oil, and commodities.
McKenna also pointed out that even with the stronger US dollar commodities have held reasonably firm.
“That’s something that can encourage the Aussie dollar bulls – assuming there are some left after the Aussie reversed back off 77 cents for the 8th time in the past few months last week,” he said.
What the commodity strength in the face of US strength suggests is that the move in the US dollar is very specific to the direct relationships with the assets, or currency against which the US dollar is being priced.
“We don’t see any blanket buying of the US dollar at the moment,” McKenna said.
If prices in Australia have gone the same way as prices in most of the rest of the world recently then the lift in fuel is likely to give the CPI a boost meaning the market expectation of a headline 0.4% is likely close to the market, or could perhaps be a little light.
“Such an outcome would rule out a cut anytime soon. But a low number, say below 0.3%, would likely open the door to heightened expectations of a cut next week on Melbourne Cup Day,” McKenna said.
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