Australia is an important country in the Pacific with a population of more than 24 million people and a Gross Domestic Product (GDP) of more than $1.32 trillion. This makes it the 14th largest economy in the world. Other than its scale, Australia is important among the investment community for a number of reasons.
First, investors use it as a proxy for China, a country which is difficult to invest in. The reason for this is that Australia’s economy depends to a large extent on China. Indeed, China accounts for more than a third of all Australia’s exports.
Second, it is one of the largest commodity countries in the world. The country is known for its large mineral deposits of iron ore, coal, corundum, and wheat. Therefore, data from the country can help move the commodities market.
Third, the country is known for its stability. This makes it an ideal investment location for investors seeking to put their funds in a safe and secure place. In recent years, most of the investments in the country have come from Asia.
Fourth, the country has many global ties especially with the other Asian-Pacific countries. It is also a member of the G20 and other global organizations.
Today, the Australian dollar continued the slide that started a week ago. The reason is that the country released weak inflation numbers. In the first quarter, the consumer prices rose by an annualized rate of 1.3%, which was lower than the expected 1.5%. In the fourth quarter, the CPI had risen by 1.8%. On a QoQ basis, the CPI was unchanged, while investors were expecting a growth of 0.2%. In the quarter, the trimmed mean CPI rose by 1.6%, which was lower than the expected 1.7%. It rose by a quarterly rate of 0.1%. The weighted mean CPI rose by an annualized rate of 1.2%, which was lower than the expected 1.6%.
These numbers came a week after the Reserve Bank of Australia 9RBA) said that it might be forced to lower interest rates. While the pair dropped on that news, it gained after the positive news from China, where the economy rose by 6.4%. This was a bullish thing for Aussie because of its strong ties to China.
Today, the AUD/USD pair declined to a low of 0.7027 after the weak inflation numbers. The decline was a continuation of the decline that started last week, when the pair reached a high of 0.7205. On the chart below, this price is below the 21-day and 42-day moving averages. The RSI has declined to a low of 17. For the rest of the day, the pair could attempt to recover, but chances are that it may resume the downward trend.