Australia Annual Inflation Turns Negative for First Time Since 1998


Australia's annual inflation turned negative for the first time in 22 years in the pandemic-hit second quarter as government childcare subsidies and lower oil prices fueled the biggest quarterly fall on record.

The country's consumer price index fell by 1.9% over the three months to June 30, according to the official Australian Bureau of Statistics. Annual inflation fell to minus 0.3% from 2.2% three months earlier.

The ABS said the government's move to make childcare free from April 6 as part of its response to the economic hit from the coronavirus was the biggest driver of Australia's first annual deflationary print since March 1998.

The largest sector drag on prices came from an 11% fall in household contents and services, which included a 95% drop in childcare costs due to the subsidies.

Fuel prices declined 19% in the quarter, while falling education costs also weighed.

ABS chief economist Bruce Hockman said the overall CPI would have risen 0.1% in the quarter without those three factors.

The cost of food and non-alcoholic beverages rose 0.5% as sellers reduced discounting as demand rose for long-life items such as canned and dried goods.

A rebound is likely in the third quarter, with the childcare-subsidy scheme having ended on July 12.
In 72 years of records, Australia has only had annual deflation on two previous occasions, in 1962 and 1997-98.

Here is the Daily Chart of AUD/USD by Trading Central:
Trading Central AUDUSD Daily Chart (7.28.20) - Forex Trading tutorials for beginners in the Philippines

INTRADAY MARKET INSIGHTS


USD/JPY Intraday: 
Watch 104.65 downside. The pair remains on the downside after retreating from a high of 105.69 seen yesterday. Currently it remains capped by the key resistance at 105.25 (around the 50-period moving average) while testing the immediate support at 104.90. The relative strength index has not yet recovered the neutrality level of 50, showing a lack of upward momentum for the pair. A break below 104.90 would trigger a further fall toward 104.65.

EUR/USD Intraday:
Key resistance at 1.1745. The pair is off a low of 1.1697, but is still below the key resistance at 1.1745. And the descending 50-period moving average continues to maintain intraday bearishness. A return to the immediate support at 1.1700 would call for a further decline toward 1.1680.

AUD/USD Intraday:
Upside prevails. The pair is shooting above the upper Bollinger band calling for acceleration to the upside. A break above the overhead resistance at 0.7175 would trigger a further advance toward 0.7195. Only a return to the key support at 0.7140 would open a path toward 0.7125 on the downside.

NZD/USD intraday: 
Rebound. The pair is rebounding and challenging both 20-period and 50-period moving averages. The relative strength index crosses above its neutrality level at 50, calling for a further bounce. To sum up, as long as 0.6634 is not broken, look for a rise to 0.6693 before targeting to 0.6708 in extension. Alternatively, a break below 0.6634 would open a path to 0.6608 on the downside.

GBP/USD Intraday: 
Turning down. The pair has swung to levels close to the lower Bollinger band turning the intraday bias as bearish. A further decline toward the key level of 1.2900 (around the 50-period moving average) would open a path toward 1.2860 on the downside. Alternatively, a return to the key resistance at 1.2950 would call for a further rise toward 1.2985 on the upside.

USD/CHF Intraday: 
Rebound expected. The pair posted a rebound after posting a false breakout signal. Currently, the prices are trading above the 20-period moving average. The relative strength index also indicates a bullish divergence signal, suggesting the loss of downward momentum. To sum up, as long as 0.9160 acts as the support level, look for a bounce with targets at 0.9190 and 0.9210 in extension. Alternatively, below 0.9160, expect another down leg with 0.9150 and 0.9135 as targets.

USD/CAD Intraday: 
Bounce. The pair posted a rebound and returned the level above both 20-period and 50-period moving averages. A support base at 1.3350 has formed and has allowed for a temporary stabilization. Hence, as long as this support base holds on the downside, the pair should bring another up leg with targets at 1.3405 and 1.3430 in extension. On the other hand, a break below 1.3350 would bring a drop with 1.3325 and 1.3300 as targets.

EUR/JPY Intraday: 
Bullish bias remains. The pair is trading above the key support level at 122.78, helping to maintain the bullish bias. Even though a continuation of consolidation cannot be ruled out, its extent should be limited. Hence, unless the support level at 122.78 is violated, the pair should bring a bounce with targets at 123.58 and 123.79 in extension. On the other hand, crossing below 122.78 would open a path to 122.43 on the downside.

EUR/GBP Intraday: 
Bullish bias above 0.9037. The pair posts a bounce and challenges the 20-period moving average. A support base at 0.9037 should limit the downside potential. The relative strength index breaks up the oversold level at 30. In this case, as long as 0.9037 is not broken, intraday bullish bias remains with up targets at 0.9094 and 0.9109 in extension. In an alternative scenario, a break below 0.9037 would trigger a decline to 0.9011 as a target.

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