The Australian Dollar (AUD) is experiencing a decline as the latest Consumer Price Index (CPI) data from Australia revealed a significant slowdown in inflation.
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The CPI rose by 0.6% quarter-on-quarter, marking a notable decrease from the previous quarter’s 1.2% and falling below the expected 0.8%. This unexpected deceleration has prompted traders to reassess the outlook for the Reserve Bank of Australia’s (RBA) monetary policy, with potential implications for the AUD/USD pair.
RBA Rate Cut Speculation Amid Inflation Slowdown
The softer-than-expected CPI figures have spurred speculation regarding potential rate cuts by the RBA in response to the subdued inflationary pressure. Market participants are now factoring in the possibility of as many as two rate cuts throughout the year, reflecting concerns over the economic outlook and the need for stimulus measures to support growth.
Impact of Geopolitical Tensions and Risk-off Sentiment
In addition to the implications of the CPI data, the Australian Dollar is facing downward pressure amid prevailing risk-off sentiment fueled by heightened geopolitical tensions, particularly in the Middle East. This cautious market environment is contributing to the AUD’s losses against the US Dollar, further shaping the currency’s near-term trajectory.
Expectations Surrounding RBA Policy Meeting and Interest Rates
As the RBA prepares for its upcoming policy meeting scheduled on February 5 and 6, attention is focused on the central bank’s stance regarding interest rates. While the market anticipates the RBA to maintain the status quo on interest rates, the recent CPI data could influence the bank’s forward guidance and any potential shifts in its policy outlook.
China’s Economic Indicators and Their Impact
Meanwhile, positive developments in China’s economic indicators, including the Non-Manufacturing Purchasing Managers’ Index (PMI), have the potential to mitigate the downward pressure on the Australian Dollar. The improvement in China’s service sector performance and manufacturing activity could serve as a stabilizing factor for the AUD, given the close trade relationship between Australia and China.
AUDUSD Intraday
The Australian Dollar (AUD) faces intensified selling pressure in the intraday market, with a recommendation to sell against the US Dollar (USD). The entry price at pivot is set at 0.6590, while the target and take profit levels are identified at 0.6545 and 0.6530, respectively. This trade carries a 2% risk per trade within the spot market for the foreseeable period.
Technical Indicators
The Relative Strength Index (RSI) demonstrates strong downside momentum, reinforcing the bearish outlook for the AUD/USD pair in the intraday session.
EUR/USD Struggles Around 1.0800
The EUR/USD pair is currently facing downward pressure, trading near the 1.0800 level during the European session on Wednesday. The weakening of the pair can be attributed to the increasing demand for the US Dollar, fueled by diminishing expectations of a rate cut in March ahead of the Federal Reserve policy announcements. Market sentiment is cautious as participants await the release of German inflation data.
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