AUD/USD ticks higher as Australian inflation bounces back

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at He lives in Nairobi with his… read more.
on Oct 28, 2020
  • The AUD/USD pair rallied today as traders reacted to the strong inflation data from Australia.
  • The headline CPI rose by 1.6% in the third quarter after falling by 1.9% in Q3.
  • The biggest contributor to rising prices was furnishings and home products.

The Australian dollar (AUD/USD) is up by 0.10% as traders react to the relatively strong Australian inflation data. It is trading at 0.7136, which is in the same range it has been recently.

AUD/USD rises after strong inflation

Australia returns to inflation

This year, Australia suffered its first recession in more than three decades because of the coronavirus pandemic. The disease has infected more than 27,000 people and killed close to 1,000, which is an impressive achievement. In recent weeks, the country has managed to control the second wave of the virus in Melbourne and Victoria.

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And now, the country’s consumer inflation has started to bounce back. According to the Australia’s Bureau of Statistics, consumer prices rose by 1.6% in the second quarter. That was a bit higher than the median estimate of 1.5% by a panel of economists polled by Reuters. On a quarter-on-quarter basis, the prices rose by 0.7% after falling by 0.3% in the second quarter.

Notably, the trimmed mean rose by an annualised rate of 1.2% while the weighted mean rose by 1.3%. The weighted mean is derived from the price changes of all consumer price index components while the trimmed mean is calculated using a “weighted average of percentage change from the middle 70% of the distribution.”

According to the bureau, the biggest contributor to higher prices in Australia was furnishings and household products, transport, and education, whose prices rose by 12%, 3.4%, and 2.1%. Notably, child care rose by 9% after the end of free child care in July. On the other hand, the biggest laggards were communications, health, and food and non-alcoholic beverages.

By region, consumer prices rose the most in Canberra and Brisbane, where they rose by 2.3%. The regions with the lowest inflation were Melbourne, Adelaide, and Hobart.

Australia has three main things in its favour. First, the Chinese and East Asian economy has bounced back. This is an important fact because of the volume of trade the country does with the region. Second, the country has almost won its battle against the Covid-19 pandemic. In recent days, it has reported less than 30 cases every day. Finally, commodity prices have risen, with copper and iron ore reaching multi-year highs.

AUD/USD technical outlook

AUD/USD technical chart

On the daily chart, we see that the AUD/USD price has been moving sideways in recent days. The price is slightly above the September low and below this year’s high of 0.7420. It is also along the 25-day and 15-day exponential moving averages. It is also between the pivot point and the first support. Therefore, for today, I expect that the pair will remain in this range but in the longer-term, the bias remains to the upside. Get started in trading with our free forex courses.

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