Australian Dollar loses ground on softer monthly Aussie CPI, improved US Dollar

• Australian Dollar extends its losses following the softer-than-expected Aussie CPI.
• Australia’s Monthly Consumer Price Index (YoY) rose by 3.4%, slightly below the expected 3.5%.
• US Dollar gains ground on risk aversion ahead of Personal Consumption Expenditures.

The Australian Dollar (AUD) extends its losses for the second successive session on Wednesday. The AUD/USD pair experiences losses following softer-than-expected Aussie consumer prices, potentially prompting the Reserve Bank of Australia (RBA) to consider a dovish stance on the interest rate trajectory. This outlook is exerting downward pressure on the AUD.

Australia’s Monthly Consumer Price Index (YoY) rose by 3.4% in February, consistent with previous levels but slightly below the anticipated 3.5%. Still, the latest reading pointed to the lowest since November 2021. The AUD has faced downward pressure following the release of Westpac Consumer Confidence on Tuesday, which dipped 1.8% to 84.4 in March 2024 from February's 86.0, easing from 20-month highs.

The US Dollar Index (DXY) saw its second consecutive day of gains amid a risk-off sentiment, driven by anticipation surrounding the upcoming release of US Personal Consumption Expenditures (PCE) scheduled for Friday. However, the decline in US Treasury yields may be attributed to the expectations surrounding the US Federal Reserve (Fed) regarding potential rate cuts. This sentiment could potentially limit the advances of the US Dollar.

Daily Digest Market Movers: Australian Dollar depreciates on softer consumer prices

• Australia’s Westpac Leading Index (MoM) increased by 0.1% in February, against the previous decline of 0.09%.
• Australia's government has pledged to support a minimum wage increase aligned with inflation this year, recognizing the ongoing challenges low-income families face amid rising living costs.
• According to a Bloomberg survey of economists, the consensus expectation is for the People's Bank of China (PBoC) to implement two additional Reserve Requirement Ratio (RRR) cuts in 2024, amounting to a total reduction of 50 basis points.
• Chinese President Xi Jinping is scheduled to meet with US business leaders. This meeting serves as a follow-up to his November dinner with US investors in San Francisco.
• Atlanta Fed President Raphael Bostic expressed his expectation for just one rate cut this year, cautioning that reducing rates prematurely could lead to greater disruption.
• Chicago Fed President Austan Goolsbee aligns with the majority of the board, anticipating three cuts. However, Goolsbee mentioned the necessity for further evidence indicating a decrease in inflation before proceeding with rate cuts.
• US Durable Goods Orders increased by 1.4% in February, against the 1.3% expected and previous decline of 6.9%.
• US Durable Goods Orders ex Defense rose by 2.2% in February, compared to the expected 1.1% and 7.9% previous decline.
• US Housing Price Index (MoM) decreased by 0.1% in January, against the December’s increase of 0.1%.

Technical Analysis: Australian Dollar falls to near 0.6520 followed by March’s low

The Australian Dollar trades near 0.6520 on Wednesday. A notable support level is positioned at the psychological mark of 0.6500, followed by March’s low at 0.6477. If the AUD/USD pair breaks below this level, it could test the major support of the 0.6450 level. On the upside, immediate resistance may be encountered around the 23.6% Fibonacci retracement level of 0.6541. This area is aligned with the major barrier of 0.6550 and the 21-day Exponential Moving Average (EMA) at 0.6553.

AUD/USD: Daily Chart