The Impact of Trade Data and US Inflation on AUD/USD

The Impact of Trade Data and US Inflation on AUD/USD

The AUD/USD exchange rate experienced a slight gain of 0.19% after a previous decline of 0.49% during the previous session. This article explores the potential impact of trade data from Australia and US inflation numbers on the Australian dollar. The analysis delves into the trade relationship between Australia and China, as well as the labor market conditions and their effect on consumer spending.

Australia’s trade-to-GDP ratio stands above 50%, with 20% of its workforce engaged in trade-related jobs. Therefore, any improvements in trade terms would significantly impact the country’s economy and subsequently influence the value of the Australian dollar. Notably, China, Australia’s major trading partner, accounts for one-third of its exports. An increase in demand from China could signal a global pickup in demand, ultimately boosting the Australian economy and easing concerns about the Chinese economy.

Attention is also placed on the upcoming US Consumer Price Index (CPI) report and weekly jobless claims. If the US inflation numbers exceed expectations, there may be a reduction in expectations of a rate cut by the Federal Reserve in March. A more hawkish stance by the Fed could raise borrowing costs and reduce disposable income. Lower disposable income could lead to a decrease in consumer spending and dampen demand-driven inflation. Economists project an increase in the US annual inflation rate from 3.1% to 3.2% in December, while the core inflation rate is expected to soften from 4.0% to 3.8%.

The short-term outlook for the AUD/USD exchange rate will largely depend on the US inflation numbers. Recent Australian Monthly CPI indicators point to a softer inflation environment. If US inflation rises, it may steer monetary policy divergence towards the US dollar. Currently, the AUD/USD remains above the 50-day and 200-day EMAs, which suggests a bullish price signal. A breakthrough of the $0.67286 resistance level could pave the way for a run towards the $0.68096 resistance level. On the other hand, a drop below the $0.66500 handle would give bears an opportunity to target the 50-day EMA and the $0.66162 support level.

Analyzing the technical indicators, the AUD/USD sits below the 50-day EMA, indicating a bearish near-term outlook. However, it remains above the 200-day EMA, signaling a bullish longer-term outlook. A breakout from the 50-day EMA and the $0.67286 resistance level would bring the $0.68096 resistance level into play. It is worth noting that selling pressure may intensify at $0.67250, as the 50-day EMA aligns with this resistance level. Conversely, if the exchange rate falls through the 200-day EMA, the $0.66162 support level would become a target. The 14-period 4-Hourly RSI indicates a downward trend, suggesting a potential drop to the $0.66162 support level before entering oversold territory.

The AUD/USD exchange rate is influenced by various factors including trade data from Australia and US inflation numbers. Positive trade terms and increased demand from China can significantly impact the Australian economy and strengthen the Australian dollar. Conversely, US inflation numbers can influence the monetary policy divergence between the US and Australia, potentially affecting the interest rates and disposable income. The technical indicators of the AUD/USD suggest a mixed outlook, with the potential for both bearish and bullish movements. Traders and investors should carefully monitor the upcoming release of Australian trade data and US inflation numbers to gauge the future direction of the AUD/USD exchange rate.

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