AUD/NZD: wave goodbye to the March high objectives on Aussie CPI miss

• Aussie CPI below RBA's 2-3% target
• NZ politics anchors the Kiwi

On the back of the Aussie CPI miss, currently, AUD/NZD is trading at 1.1217, down -0.27% on the day, having posted a daily high at 1.1271 and low at 1.1214.

AUD/NZD has dumped and is now way off the course for the 1.1335 (March 2016 high) that could have been the case should CPI have fallen into the RBA's 2-3% inflation target while if NZ politics continue to anchor the bird in its monthly decline. The Australian Q3 trimmed mean CPI rises just 0.4% q/q; vs the expected 0.5% while the Australia Q3 consumer prices rise 0.6% q/q vs expected. 0.8%. That has left the trimmed mean below the target of between 2-3% at 1.8%.

AUD/NZD 1-3 month and longer-term outlook for Aussie inflation 

Analysts at Westpac's longer-term view is for a resumption of the trend rise which started in June should test 1.13 contingent on AU economic data remaining supportive, commodity prices recovering, risk sentiment remaining elevated, and NZ politics weighing on the NZD. This is plausible considering Aussie CPI is not a complete washout at 1.8% and potentially 6 basis points off a level that the RBA may wish to reconsider its stance on interest rates. Indeed, should economic situation pick up in Australia, core inflation should remain elevated towards 2% or higher throughout 2018.

AUD/NZD levels

AUD/NZD is now below the hourly 50 SMA at 1.1232 but is held up at the congestion zone of 1.1200/20. 1.1160 is a key target to the downside that would jeopardise the consolidation channel and open up further room below the 200 SMA on the hourly sticks at 1.1082 until full reversal o a breach below 1.1020. On the upside, 1.1255 is key for legs towards the aforementioned 1.1355 level.

AUD/USD hits 3-week low as the yield differential narrows on weak Aussie CPI data