AUD/USD Holds at $0.6672 as CPI Hits 2.8% & Fed Cut Odds Rise — What’s Next?
The AUD/USD is trading at $0.6672, within an uptrend channel. Resistance at $0.6688 is capping gains while support at $0.6660 is key.
Quick overview
- The AUD/USD is currently trading at $0.6672, facing resistance at $0.6688 and support at $0.6660.
- Australia's consumer inflation rose to 2.8% year on year in July, prompting the RBA to maintain a cautious stance despite strong domestic demand.
- The US economy shows mixed signals, with strong retail sales lifting the US Dollar, while expectations of Fed rate cuts may limit its strength.
- The AUD is at a critical juncture, with potential for upward movement if it breaks $0.6688, but risks of pullbacks remain if US data turns stronger.
The AUD/USD is trading at $0.6672, within an uptrend channel. Resistance at $0.6688 is capping gains while support at $0.6660 is key. The 50-SMA at $0.6626 is guiding the uptrend and the 200-SMA at $0.6523 is well below, bullish.
Momentum indicators are balanced: RSI is 61, no overbought pressure. If price breaks $0.6688, next targets are $0.6722 and $0.6749. Below $0.6660 and we could see pullbacks to $0.6630 or the 50-SMA.
Inflation, RBA Signals and Domestic Data
Australia’s consumer inflation rose 2.8% year on year in July, highest since mid 2024. Core inflation (trimmed mean) was 2.7%, broad price pressures. The RBA has cut rates 3 times this year to 3.60% but inflation has rebounded and consumer spending is strong so the next cut may not be until later in 2025.
Strong GDP, trade surplus and demand support the AUD. But employment worries, highlighted by recent job losses, remind markets the RBA is cautious.
Global Drivers and Market Outlook
The US economy is sending mixed signals. Retail sales rose 0.6% month on month in August, way above expectations, consumer activity is strong despite a softer labour market. This lifted the US Dollar, the Dollar Index is near 96.70.
But markets still expect the Fed to cut, starting with 25bps in September and more later in the year. This is capping US Dollar strength.
China, a key partner for Australia, reported slower retail sales and industrial production, weaker demand for exports. But the positive shift in US-China trade relations has given some relief to risk currencies like the AUD.
The AUD is at a cross roads. Strong domestic inflation and demand means the RBA can hold rates steady, while Fed rate cut expectations support the pair. In the short term a break above $0.6688 could see the currency to $0.6720-0.6750 but stronger US data or hawkish Fed comments could see a pullback to $0.6630. Be prepared for consolidation before a clear break.
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