After yesterday's strong volatility in the currency market caused by the speeches of the heads of the Central Banks of Eurozone and the UK, the USD started to decline today. The decline in the USD was triggered by the rise in the pair AUD/USD pair at the Asian session, on the positive Australian inflation data for Q3. Consumer prices in Australia have grown by 0.7% against the forecast of 0.4%. The index of core inflation was at the level of +0.4, which coincided with the forecast.
Australian inflation data has caused the increase in buy positions for the Australian dollar, because the likelihood of the interest rate cut by the Reserve Bank of Australia in November has dropped.
The lowering in the rate will be possible if the inflation remains low for a long time, situation in the labour market gets worse and the housing market significantly cools, said Governor of RBA Philip Lowe. last week.
Current interest rate in Australia is 1.5%. It is one of the highest in the countries with advanced economies. Economy of Australia is one of the most stable in the world, which increases buy positions on the Australian assets and currency.
Many economists believe that the rate in the country may remain at the current level of 1.5% until mid-2017, which will support the Australian dollar.
Note, however, that oil prices started to decline again.
The price of crude oil Brent is approaching the level of 50 USD per barrel after the rise by 18% to the level of 53.70. Oil and gas sector is one of the key sectors of the Australian economy, and the decline in oil prices puts pressure on the Australian dollar.
So you should pay attention to this fact and to consider opportunities to enter into short positions on the pair AUD/USD especially as the pair is at key resistance level 0.7700. The pair is at the key resistance level of 0.7700, so short positions are preferable.
Today, important US data will be released as follows: at 15:30 - US foreign trade balance for September, at 16:45 – Markit composite business activity index and business activity index in the US service sector for October, at 17:00 - US data on sales of new homes in September, at 17:30 - Weekly report of the US Department of Energy on stocks of oil and oil products in the stores. It is expected that oil stocks will rise by 2.1 million barrels in the week of October 15-21, although many US refineries are shut down for the seasonal maintenance. If the data will be as expected, the price of oil will fall again, which will be a negative factor for the Australian currency.