Aussie CPI - what to expect in AUD/USD?

Currently, AUD/USD is trading at 0.7644, down -0.02% on the day, having posted a daily high in early Asia at 0.7651 and low at 0.7641, consolidated ahead of the key CPI event today having recovered from overnight lows of 0.7618.

Markets are awaiting to see whether or not the RBA's wait and see mode is going to continue into the first quarter of 2017 based on this result. Australia's Consumer Price Index (CPI) was a concern when it slowed more-than-expected in the second-quarter. The headline data dropped to 1.0% from 1.3% during the first quarter although the core rate of inflation remained robust at the annualized rate of 1.7% for another straight quarter, although a combination of the two weighed on the Aussie as the RBA's target of between 2-3% was well off and the Aussie as a result dropped below the  the 0.7500 handle within the rising 2016 trend. 

This is going to be a very important set of data for the RBA this time around as it could determine whether they need to act vrs a low inflationary environment below their preferred bracket of inflation target between 2-3%. The general consensus is for Q3 CPI to uptick for the first time since 4Q 2015 while the core rate of inflation is expected to hold steady at an annualised 1.7% for the third consecutive quarter. However, analysts at Westpac for Australian Q3 CPI are expecting a 0.9% qoq rise in headline inflation on food; utilities and seasonality. "The core measure should remain benign at 0.4% qoq, 1.6% yoy."

AUD/USD outlook on CPI:

Analysts at Westpac explained that the rising commodity prices and their expectation of an above-consensus CPI should see the AUD higher, above 0.7650 towards the 0.7700 area.

AUD/USD levels

Meanwhile, with spot trading at 0.7645, we can see next resistance ahead at 0.7646 (Daily Open), 0.7651 (Daily High), 0.7657 (Yesterday's High), 0.7668 (Daily Classic R2) and 0.7692 (Daily Classic R3). Support below can be found at 0.7642 (Weekly Classic PP), 0.7641 (Daily Low), 0.7639 (Daily Classic R1), 0.7637 (Hourly 100 SMA) and 0.7636 (Hourly 20 EMA).

Westpac's AUD/USD 1-3 month: "While further gains to around 0.77 are possible during the month ahead, driven in part by the faltering US dollar and yield-chasing flows, the AUD is losing energy (perhaps a reflection of its declining yield advantage). By year end, there’s a case for a correction towards 0.74 if the Fed tightens in December as we expect. (13 Sep)."