The rate of AUD to USD reversed higher this week after declining by 3 cents in the last two weeks. The first resistance at 0.6450 was broken yesterday after some positive manufacturing PMI figures from Australia, while the USD was retreating as well, which brought AUD/USD to the second resistance level at 0.65.

AUD/USD Chart Daily – Buyers Facing the 50 SMA Now

The significant reversal observed on Friday, bouncing from below long-term uptrend support, provided a clear indication of potential price action for Monday. This momentum helped the AUD/USD pair move back towards horizontal support around the previous 2024 low of 0.6440-50.

The recent sequence of three candles suggests further potential gains, potentially setting the AUD/USD pair on a path higher after reaching the previous support at 0.65. Additionally, signs from technical indicators such as the Stochastic indicator and the Relative Strength Index (RSI) bottoming out, indicate bullish momentum and a possible shift in market sentiment.

The Australian Q1 inflation report for March was expected to show a year-on-year cool-off to 3.4% from 4.1% in February, while the quarter-on-quarter measure was expected to show an increase to 0.8% from 0.6% in February. The market had anticipated the monthly CPI MoM report to remain unchanged at 3.4% compared to the previous month. However, the market focus was primarily on the underlying inflation figures, such as the trimmed mean and weighted mean CPI, as they are of greater concern to the Reserve Bank of Australia (RBA). With the market having already priced in rate cuts through 2024, the first rate cut is now expected in 2025.

Australian CPI Inflation Report for March

• Headline CPI increased by 1% quarter-on-quarter, exceeding expectations of 0.8%. Year-on-year, it stood at 3.6%, slightly above the expected 3.5% but lower than the previous figure of 4.1%. The monthly CPI was reported at 3.5%, higher than the expected 3.4%.
• Trimmed mean CPI, a core measure, also rose by 1% quarter-on-quarter, in line with expectations. However, its year-on-year figure of 4% was higher than the expected 3.8% but lower than the previous 4.2%.
• Weighted median CPI increased by 1.1% quarter-on-quarter, surpassing expectations of 0.9%. Year-on-year, it stood at 4.4%, meeting expectations and matching the previous figure.
• Services inflation was reported at 4.3% year-on-year, the lowest since June 2022, while goods inflation was at 3.1% year-on-year, the lowest since September 2022.

AUD/USD Live Chart