AUD/USD and CPI: Levels, Ranges and Targets

As currency market structural reforms emerge in current formats, EUR/USD is mestastaizing into the new AUD/USD to trade inside ever decreasing ranges while GBP/USD and GBP pairs will remain volatile inside wider ranges as current reforms unfold. Once complete in February 2017, GBP volatility will suffer.

By osmosis, the market and structural reforms now imposes on traders to become news traders and news forecasters as this is the only source to generate volatility. An as expected release will lack movement while those rarely out of sync forecasts will see tremendous volatility. The vast majority of trading movements and profit potential will be focused in Europe trading. New Zealand joined the reform movement by introduction of the 1 year bond while Australia remains a work in progress.

To understand Australia’s CPI is to focus on the Trimmed Mean portion of the release because it currently holds Australia’s present CPI at 1.3. In March, the Trimmed Mean was 0.2. Currently 0.2 is severely oversold and literally on the floor due because the nearest average break to see significant rises is 0.5500, 0.5541 and 0.65. The averages range from 0.5500 to 0.832 and provide rock solid resistance. Any rise in the Trimmed Mean is a correction until at least 0.5500 and 0.5541 breaks. Current targets range from lows at 0.37 to 0.48 highs with an average at 0.427. The Trimmed Mean for the quarter is forecast at 0.4 so as expected is a perfect approximation.

The Trimmed Mean forecast yearly at 1.7 however is far out of bounds and above far extremes from every average 1 to 9 years and is at the upper highs at the 10 year average that dates to the lower 1980’s. The peak is 2.2 and out of bounds begins at 1.62 and tracks lower to 1.2’s and 1.3’s. The Trimmed Mean must move and break 0.5500 and 0.5541 to see CPI higher over future quarters.

Australia’s CPI at current 1.3 must break to see the 2% target 2.04 then 2.33 and 2.50. Significant headwinds exists in the averages from 2.04 to 3.38 and many averages in between. Any rise in CPI is a correction unless or until 2.04 breaks.
The averages like Trimmed Means are all oversold. The forecast is 1.1 The lowest targets from 1.1 is 1.08 and 1.06. The highest targets begin at 1.2, 1.29 and track higher to 1.77. The average target is 1.42 and 1.44 at the 2.04 average. Any lows in CPI seen only leaves the averages much more in severe oversold territory. In a larger view, CPI at 1.3 is not only low but sits dead flat on the floor. The perspective in flat on the floor is derived from past 200 ish CPI quarters. Overll as seen from Australia, New Zealand and others is the potential for recovery is astounding as overall economies are at lowest lows and await the impetus to move to upward bounds.

For AUD/USD, bottoms are held by significant breaks at 0.7470 and 0.7463. Both hold AUD/USD moves to the downside for many weeks. A break of 0.7470 and 0.7463 targets next group of headwinds at 0.7425, 0.7418, 0.7411 and 0.7408. AUD/USD is built upon a base at 0.7218 and to see the downtrend gain speed then 0.7408 must break. Throughout the week, reported levels changes by only a few pips.

On the topside, 0.7500, 0.7525 and 0.7530 are tops of the channel and must break to see AUD target 0.7600’s. Levels all week changes only by a few pips. To see AUD reach far higher levels then 07804 must break. In the way to 0.7804 is a dynamic line and today reports at 0.7753.