AUSTRALIA CONSUMER’S MOOD UNDERMINED BY RATE RISK AND INFLATION: HOW WILL AUD/USD REACT?
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Author: Mr. Amar – Technical Analyst

A measure of Australian consumer confidence fell for the fifth straight month in April as rising inflation and the risk of higher interest rates weighed on household finances and purchasing intentions. The Westpac-Melbourne Institute consumer confidence index, released today, fell 0.9% in April from March when it fell 4.2%. The index is down 19.6% to 95.8 since April last year, almost back to pre-pandemic levels. The poll found that the March government budget had a limited impact on sentiment in the country, although it included pre-election tax breaks and cuts in fuel excise duties.

The AUD/USD pair has seen a slight pullback around 0.7500 after a decent bullish reversal from Tuesday’s low of 0.7400. The largest rebounded after US inflation was released on Tuesday. A US Consumer Price Index (CPI) was highly anticipated by market participants and brought some downside offers. Inflation, which has been high for decades, and higher labor market participation in the US signal a significant interest rate hike in monetary policy in May. Commodity price pressures are hurting the US economy, reflected in a muted US CPI.

Previously, the asset had pulled back sharply from last week’s high of 0.7662 after the Reserve Bank of Australia (RBA) kept interest rates on hold and adopted a wait-and-see approach. The RBA’s monetary policy outlook indicated that the government is yet to face any constructive price pressures that could push interest rates higher. AUD/USD is struggling to regain above the 38.2% Fibonacci retracement level of the March-April move after prices rebounded from a fresh monthly low set overnight. If the bulls manage to scale above this Fib level, it would open the door for a test of the 0.7500 psychological level.