Australian Dollar rises on upbeat CPI figures, subdued US Dollar

■  The Australian Dollar appreciates after the release of stronger-than-expected CPI data released on Wednesday.

■  The Australian Dollar receives upward support due to the improved risk appetite, along with the higher ASX 200 Index.

■  The US Dollar faced challenges after the downbeat PMI data was released on Tuesday.

The Australian Dollar (AUD) extends its winning streak for the third successive day after the release of the better-than-expected Consumer Price Index (CPI) data on Wednesday. The upbeat inflation figures have the potential to fuel a hawkish sentiment regarding the Reserve Bank of Australia’s (RBA) monetary policy outlook. This has contributed to the strength of the Australian Dollar (AUD), thereby supporting the AUD/USD pair.

The Australian Dollar (AUD) advances, tracking the higher ASX 200 Index, with notable contributions from the technology and healthcare sectors. Australian stocks are mirroring the positive momentum observed on Wall Street, driven by strong corporate earnings reports that have bolstered market sentiment.

The US Dollar Index (DXY), gauging the US Dollar (USD) against six major currencies, experiences downward pressure amid a decrease in US Treasury yields. Furthermore, disappointing Purchasing Managers Index (PMI) data from the United States (US) weighed on the US Dollar (USD), thereby supporting the AUD/USD pair. Nevertheless, inflation reports indicate that business activity in the United States continued to expand in April, albeit at a slower pace compared to March.

Daily Digest Market Movers: Australian Dollar appreciates on upbeat consumer inflation data

Australia’s Consumer Price Index (CPI) rose by 1.0% QoQ in the first quarter of 2024, against the expected 0.8% and 0.6% prior. CPI (YoY) increased by 3.6% compared to the forecasted 3.4% for Q1 and 4.1% prior.

Australia’s Monthly Consumer Price Index (YoY) rose by 3.5% in March, against the market expectations and the previous reading of 3.4%.

On Tuesday, the US preliminary S&P Global Composite PMI fell to 50.9 in April from the previous reading of 52.1. Meanwhile, the Manufacturing PMI dropped to 49.9 from 51.9 in the previous reading, weaker than the estimation of 52.0. The Services PMI decreased to 50.9, compared to 51.7 prior, worse than the 52.0 expected.

Australia's Judo Bank Composite Purchasing Managers Index (PMI) released on Tuesday, showed a surge to a 24-month high of 53.6 in April, marking an improvement from the previous month's 53.3. Manufacturing PMI rose to an eight-month high of 49.9 in April, compared to March's 47.3. Services PMI declined to a 2-month low of 54.2 compared to the previous reading of 54.4.

The China Securities Journal reported on Tuesday that the People's Bank of China (PBoC) will decrease the Medium-term Lending Facility (MLF) rate, aiming to lower funding costs. The next MLF rate setting is scheduled for May 15. This decision could potentially influence the Australian market, given the close trade relationship between the two countries.

The likelihood of the Federal Reserve's (Fed) interest rates remaining unchanged in the June meeting has risen to 84.6%, up from the previous week's 82.7%, according to the CME FedWatch Tool.

Technical Analysis: Australian Dollar moves above the psychological level of 0.6500

The Australian Dollar trades around 0.6520 on Wednesday. The pair has breached into the symmetrical triangle, indicating a shift towards bullish sentiment. Furthermore, the 14-day Relative Strength Index (RSI) is above the 50-level, supporting this bullish outlook.

The AUD/USD pair may aim for the psychological level of 0.6600 and attempt to reach the upper boundary of the symmetrical triangle near 0.6639, potentially reinforcing the bullish sentiment.

In terms of the downside, immediate support is anticipated around the psychological level of 0.6500, aligned with the lower boundary of the triangle. A breach below this channel could exert downward pressure on the AUD/USD pair, with the next significant support level at 0.6456. Further support is located at April’s low of 0.6362.

AUD/USD: Daily Chart