AUD/USD Price Forecast: CPI Surprise Lifts Aussie, but $0.7010 Faces Dollar Headwinds
During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well bid around $0.7010...
Quick overview
- The AUD/USD currency pair is maintaining an upward trend around $0.7010, supported by stronger-than-expected inflation data from Australia.
- Australia's CPI rose to 3.8% YoY in December, exceeding market forecasts and increasing expectations for RBA rate hikes.
- Despite the bullish sentiment for the AUD, the strength of the US dollar is limiting further gains in the AUD/USD pair.
- Technical analysis indicates that as long as the price holds above $0.6980, the bullish outlook remains intact with potential upside targets.
During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well bid around $0.7010. However, the bullish trend was mainly supported by stronger-than-expected inflation data from Australia. On the other hand, the renewed strength in the US dollar was seen as a key factor that cap further gains in the AUD/USD pair.
Australian CPI Surpasses Expectations, Boosting Inflation Data
On the data front, the Australian Consumer Price Index (CPI) rose 3.8% year-over-year (YoY) in December, up from 3.4% previously and above the market forecast of 3.6%. Meanwhile, the monthly CPI climbed 1.0%, hotter than the expected 0.7%, while the RBA Trimmed Mean CPI increased 0.2% month-over-month and 3.3% YoY. In addition to this, the quarterly CPI jumped 0.6% and 3.6% YoY, with the Trimmed Mean rising 0.9% quarterly and 3.4% annually.
Stronger Inflation Boosts RBA Rate Hike Expectations
Australia’s headline inflation remaining above the Reserve Bank of Australia’s (RBA) 2–3% target suggests that monetary policy may tighten further. Consequently, traders are now pricing in a higher probability of RBA rate hikes in the near future. Apart from this, strong employment figures, including 65.2K jobs added in December and a declining unemployment rate of 4.1%, indicate a strong labor market. Moreover, Australia’s S&P Global PMI readings showed continued growth, with Manufacturing at 52.4, Services at 56.0, and Composite at 55.5 in January, reinforcing optimism about economic expansion.
As a result of stronger inflation and economic growth in Australia, the AUD is attracting buyers. Although the AUD/USD pair has seen some short-term fluctuations, the combination of resilient CPI data, strong employment, and positive PMI readings suggests the Australian Dollar may continue to perform well in the near term.
US Dollar Strength Limits AUD/USD Gains
On the other hand, the US dollar is trading near 96.10 after recovering from losses of more than 1% in the previous session. Although the Federal Reserve is expected to keep interest rates unchanged at 3.50%–3.75% following three consecutive cuts in 2025.
AUD/USD Technical Outlook: Trendline Support Near $0.7000 Keeps Upside Bias Intact
AUD/USD is consolidating near $0.6995–$0.7000 after a strong intraday advance, with price holding firmly above a rising trendline from the $0.6920 low. The broader structure remains constructive, defined by a sequence of higher lows and a successful hold above former resistance near $0.6980, now acting as short-term support.
Candlestick structure favors continuation. Recent candles show small real bodies with lower wicks near $0.6990, signaling dip-buying interest rather than distribution. There is no bearish engulfing or breakdown pattern on the 1-hour chart, and price continues to trade above the short-term EMA cluster, keeping momentum aligned with the trend.
Momentum indicators support consolidation, not reversal. RSI has eased into the 58–60 range, reflecting cooling momentum after the rally while staying comfortably above neutral. As long as $0.6980 holds, upside targets remain $0.7018, followed by $0.7035–$0.7050. A sustained move below $0.6955 would weaken the bullish structure and point to a deeper range phase.
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