AUSTRALIA: Focus On Q1 CPI, Retail Sales & Election In A Busy Week
The focus of the week will be on Wednesday’s Q1 CPI which is forecast to show the RBA’s preferred trimmed mean falling below the top of the 2-3% target band for the first time since Q4 2021, which should signal another 25bp cut on May 20. Retail sales are on Friday and the federal election Saturday.
- Q1 headline inflation is projected to rise 0.8% q/q and 2.3% y/y, which is a significant quarterly rise up from Q4’s 0.2% but a slight drop in the annual pace from 2.4%.
- Consensus is forecasting trimmed mean to rise 0.6% q/q & 2.8% y/y in Q1 after 0.5% & 3.2% in Q4. Services will continue to be watched closely but monthly data suggest it moderated in Q1.
- Real retail sales for Q1 print on Friday and are forecast to slow to +0.3% q/q from Q4’s 1.0%. March values are expected to rise 0.4% m/m following 0.2%. Retail spending remains subdued but is no longer contracting.
- The Federal election vote is held on Saturday with a result likely in the evening local time, depending on how close it is. Polls suggest that the Labor party will hold government but there’s a distinct possibility in minority.
- Other price data include Q1 import/export prices on Thursday and PPI on Friday.
- March merchandise trade data are out on Thursday with the surplus forecast to widen slightly to $3.05bn from $2.97bn. Overall export growth remains weak driven by China and much of Asia but shipments to the US have soared recently likely to beat tariff deadlines.
- Other data include RBA March private credit on Wednesday, April CoreLogic home values on Thursday and final April S&P Global manufacturing PMI on Thursday.
- In terms of the RBA, Assistant Governor (Financial Markets) Kent speaks on Tuesday at 1205 AEST on “Australia’s external position and the evolution of the FX markets”.
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Historical bullets
USDCAD TECHS: Bullish Outlook
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4292 @ 16:50 GMT Mar 28
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD traded through support at 1.4242 on Wednesday but has recovered. A return lower and clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance is 1.4402, the Mar 20 high.
US FISCAL: Debt Limit "Extraordinary Measures" Pick Up, But Cash Dipping Pre-Tax
Treasury data shows that there were $207B of "extraordinary measures" available to circumvent hitting the debt limit as of Wednesday Mar 26.
- That's the most since Jan 27th and up from $163B a week earlier, from a total $376B available.
- However, Treasury cash in the TGA fell to $316B as of the 26th (and was down to $280B on Thursday), meaning there were a combined $523B of resources available to avert the debt limit, the lowest since the impasse began in January (and half of the starting amount of just over $1T).
- The next couple of weeks will be very important for Treasury, as they represent the biggest tax take of the year. The Congressional Budget Office reported this week that per its estimates "if the debt limit [$36.1T] remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025." Treasury wrote to Congress this month that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
AUDUSD TECHS: Remains Above Support
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6391 High Mar 17 / 18
- PRICE: 0.6291 @ 16:46 GMT Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged. A short-term bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
