Strong Headline & Core Australia CPI to Temper AUD/USD Losses

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

2Q

2017

07/26/2017 01:30:00 GMT

2.2%

1.9%

+7

+97

2Q 2017 Australia Consumer Price Index (CPI)

AUD/USD 15-Minute Chart

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Australia’s Consumer Price Index (CPI) unexpectedly slowed to an annualized 1.9% from 2.1% during the first three-months of 2017, while the core rate of inflation held steady at 1.8% per annum amid a downward revision in the prior reading. A deeper look at the report showed most components slowing or holding steady in the three-months through June, while Transportation costs bucked the trend, with the figure increasing 0.4% in the first-quarter versus a 0.3% expansion during the previous period. Nevertheless, the market reaction was short-lived, with AUD/USD regaining its footing during the European trade to end the day at 0.8004.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Headline & Core CPI Picks Up

  • Need a green, five-minute candle following the report to consider a long AUD/USD trade.
  • If the market reaction favors a bullish aussie position, buy AUD/USD with two separate lots.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bearish AUD Trade: Australia Inflation Report Continues to Disappoint

  • Need a red, five-minute candle to favor a short aussie trade.
  • Implement the same setup as the bullish AUD position, just in reverse.

Potential Price Targets For The Release

AUD/USD Daily Chart

Chart — Created Using Trading View

  • AUD/USD appears to be on its way to test the monthly-low (0.7733) as it carves a fresh series of lower highs & lows after failing to test the Fibonacci overlap around 0.7930 (50% retracement) to 0.7940 (50% retracement).
  • Keep in mind, the Relative Strength Index (RSI) managed to clear the bearish formation from September, but remains confined by the downward trend carried over from the summer months.
  • With that said, AUD/USD may continue to test the former-resistance zone around 0.7720 (23.6% retracement) to 0.7770 (61.8% expansion) for support, with the pair at risk for further losses as long as price & the RSI highlight the bearish dynamic from earlier this year.
  • Interim Resistance: 0.8270 (38.2% retracement) to 0.8295 (2015-high)
  • Interim Support: 0.7720 (23.6% retracement) to 0.7740 (78.6% expansion)

AUD/USD Retail Sentiment

Track Retail Sentiment with the New Gauge Developed by DailyFX Based on Trader Positioning

Retail trader data shows 51.9% of traders are net-long AUD/USD with the ratio of traders long to short at 1.08 to 1. The number of traders net-long is 5.4% higher than yesterday and 0.4% higher from last week, while the number of traders net-short is 5.9% lower than yesterday and 3.9% lower from last week.

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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