- The Australian dollar scored lower against the dollar as CPI expected to hold.
- US orders for durable goods declined in March 2021.
- Prices of agricultural goods, especially US dairy products, are expected to soar in 2021.
The AUD/USD pair opened at a -0.38% price change on April 27, 2021, from the previous day. The currency stood at 0.7769 ahead of Australia’s release of Consumer Price Index (CPI) index data for March 2021 (QoQ), scheduled for release on April 28, 2021. Consumer prices in Q4, 2020 were up 0.9% after jumping 1.6% in 2019 and 0.7% in Q3 2020.
Australia’s annualized CPI from 2018
Q4 2020 saw a rise in tobacco excise duty, childcare subsidies, and grants by the government on building homes. Alcohol and tobacco prices rose (9.3% vs. 8.1% in Q3) as well as education fees (2.1% vs. 1%). Food prices also increased into the new quarter but not as high as Q4 2020 (2.3% vs. 3.4%). However, quarterly CPI is expected to remain at 0.9%, but the annualized rate may increase to 1.4%.
Orders for durable goods in the US declined 0.5% in March 2021 (MoM) from a previous reading of -0.9% and against a prediction of 2.5%. Orders of non-defense ex-air goods also dropped 0.9% from a previous reading of -0.8% and against a prediction of 1.5%.
On April 17, 2021, Australia suspended direct flights from India as the number of coronavirus cases continues to surge in the Asian powerhouse.
India Covid19 deaths as of April 26, 2021
Out of 17.6 million cases, approximately 198,000 had died of the virus, with 2,771 deaths reported on April 26, 2021. This number was the highest daily count since the start of the pandemic in the populous country. The suspension of Indian flights by Australia is expected to be in force until May 15, 2021, as the humanitarian crisis continues to be reviewed.
The New Zealand dollar, like its Australian counterpart, also weakened against the greenback on April 27, 2021. Investors were cautious ahead of the Fed’s meeting on April 28, 2021.
The Australian dollar had risen on April 26, 2021, after prices of iron ore soared to new highs. The prices were buoyed by supply contradiction and product shortages, especially of high/medium grades.
|Iron Ore Futures||Commodity Exchange market||Purchase Price Increase|
|Iron ore (September 2021 Delivery)||Dalian Commodity Exchange (DCE)||1,145 Yuan (4.3% higher)|
|Iron ore price as of April 27, 2021||Benchmark 62% Fe fines||$193.58 per tonne (3.93% higher)|
|High-grade Iron ore||Brazilian index (65% Fe fines)||$226.90 per tonne|
Iron Ore Price Increase
The year 2021 saw iron ore prices rise to all-time highs owing to strong demand from China.
Iron ore-fresh high prices into 2021
China’s onslaught against Australia may work to decrease Australia’s export market owing to diversified import locations for the steel manufacturing product.
Meanwhile, as the US economy races towards recovery, futures of block cheese at the Chicago Mercantile Exchange (CME) surged 582.30% to 3,200 contracts, up from 469 contracts in January 2021. This increase was the highest futures’ gain since January 2020 (when the cheese future was launched).
Total exports of agricultural products from the US to Australia as of 2019 totaled $1.5 billion, with dairy products taking the bulk at $148 million). Under the US-Australia free-trade agreement, high prices for agricultural products are likely to favor the US dollar.
AUD/USD trading pair technical analysis
The AUD/USD pair formed a head-and-shoulders pattern indicating the price may rise towards a resistance at 0.7886. We are likely to see prices fall to 0.7783 as the pair looks for support. The chart shows the pair is headed for a downward breakout, and we may see it lodge at 0.7770.