Australia's monthly Consumer Price Index (CPI) rose by 2.5% year-on-year in January, according to data released by the Australian Bureau of Statistics. This increase fell just short of the anticipated 2.6% growth. In the currency market, the Australian Dollar (AUD) remained subdued against the US Dollar (USD) for the fourth consecutive day on Wednesday, reflecting ongoing challenges for the AUD/USD pair.
The AUD/USD pair tested immediate support at the 14-day Exponential Moving Average (EMA) of 0.6331. A decisive break below this level could lead to a bearish bias, with the pair potentially testing the psychological level of 0.6300. Meanwhile, the pair also faced challenges due to rising risk sentiment, influenced by US President Donald Trump's announcement on Monday that sweeping US tariffs on imports from Canada and Mexico would proceed after a temporary delay expires next week.
The Reserve Bank of Australia (RBA) had previously lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% last week, marking the first rate cut in four years. This monetary policy decision aimed to stimulate economic growth amidst global trade uncertainties and domestic economic challenges.
The Monthly Consumer Price Index (CPI) is a crucial economic indicator released by the Australian Bureau of Statistics. It measures changes in the price of a fixed basket of goods and services acquired by household consumers. The year-on-year reading compares prices in the reference month to the same month a year earlier, providing insights into inflationary trends.
On the technical front, the AUD/USD pair tested an immediate barrier at a nine-day EMA of 0.6342. A successful break above this level could improve short-term price momentum and support the pair in testing key psychological resistance at 0.6400, with the next hurdle at the ascending channel’s upper boundary around 0.6450.
Despite these technical and fundamental factors, the Australian Dollar was notably weak against other currencies, particularly the Canadian Dollar. This weakness was exacerbated by declining US Treasury bond yields, with 2-year and 10-year yields falling to 4.09% and 4.28%, respectively, at the time of writing.
The US economic landscape also played a role in shaping market sentiment. The US Composite PMI fell to 50.4 in February from 52.7 in January, indicating slower economic growth. Within this metric, the Manufacturing PMI rose slightly to 51.6 in February from 51.2 in January, surpassing forecasts of 51.5. However, the Services PMI declined to 49.7 in February from 52.9 in January, falling short of the expected 53.0.
These developments influenced the US Dollar Index (DXY), which measures the USD against six major currencies, falling to near 106.00. The mixed signals from US economic indicators contributed to uncertainties in global currency markets.