Global macro overview for 25/10/2017

Global macro overview for 25/10/2017:

Australia's September quarter consumer price inflation (CPI) report has come in well below expectations. The market participants expected an increase from 0.2% to 0.8%, but according to the Australian Bureau of Statistics (ABS), headline CPI rose by 0.6% over the September quarter. On a yearly basis, the CPI decreased from 1.9% to 1.8% as well. The quarterly increase was driven by higher utility, tobacco, and travel prices, offsetting weakness in vegetable, fuel and telecommunication costs. The most significant rises relate to electricity (8.9%) and gas prices, with increases in wholesale prices being passed on to consumers. On the other hand, the most significant negative contributors are vegetables and automotive fuel.

In the result, the underlying inflation rose only by 0.35%, leaving the annual rate at 1.88%. The global investors were looking for a quarterly increase of 0.5%, leaving the year-on-year rate at 2%.In this situation, the Reserve Bank of Australia inflation target of 2.0% has not been reached yet, so any talk of a near-term interest rate increase from the RBA is now postponed until better data will be delivered.

Let's now take a look at the AUD/USD technical picture at the H4 time frame. The market has broken below the key technical support at the level of 0.7732 and now is trading in extremely oversold conditions. The nearest technical support is seen at the level of 0.7713, but with such a strong downward momentum, this level might be violated as well. The next key technical support is seen at the level of 0.7570.

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