AUD/USD has been rising for five straight days, thanks to a weakening US Dollar. Eyes are now on Australia’s Q3 CPI data and the Federal Reserve’s upcoming policy decision. The pair is trading at about 0.6586, its highest point in over two weeks, breaking through important moving averages around 0.6550. Key inflation data from Australia is coming out soon and will influence the Reserve Bank of Australia’s decisions. Quarterly inflation is expected to increase by 1.1% from 0.7% in Q2, while the yearly CPI forecast is at 3.0%, up from 2.1%. The RBA’s trimmed mean CPI could rise by 0.8% quarter-over-quarter, remaining steady at 2.7% year-over-year.

September CPI Projection

For September, the monthly CPI is expected to be 3.1%, a slight increase from August. A stronger inflation figure could affect the RBA’s position at its November meeting. The Fed is expected to cut rates by 25 basis points, which markets have already priced in. Technically, AUD/USD shows positive momentum, breaking above a short-term consolidation range and finding support at 0.6550. The next resistance level is around 0.6600. If it breaks above 0.6629, it could test 2023 highs near 0.6707. Support levels are at 0.6550 and 0.6520. Recently, the Australian inflation data for the third quarter came in higher than expected at 3.2% year-over-year, while the market had predicted 3.0%. This pushed the AUD/USD past the 0.6600 resistance level, confirming the bullish trend. Attention now turns to the October swing high near 0.6629.

Impact on Reserve Bank of Australia

The unexpected rise in inflation significantly impacts the Reserve Bank of Australia’s meeting on November 4th. The futures market now suggests nearly a 40% chance of a rate hike, up from the 15% probability just one day ago. This makes short-dated AUD call options an attractive way to capture further upside, especially since the RBA has held rates firm through late 2024 due to persistent inflation. Now, all eyes are on the Federal Reserve’s decision later today, with a rate cut of 25 basis points widely expected. Recent data shows a slight increase in US jobless claims to 220,000 and softer retail sales figures from last week, supporting this dovish expectation. The contrast between a potentially hawkish RBA and a dovish Fed creates a strong favorable backdrop for the Aussie. From a technical viewpoint, the previous resistance at 0.6550, which aligns with key moving averages, now serves as solid support for any pullbacks. As long as we stay above this level, the easiest path is upward, targeting the yearly high around 0.6707. Consider using any dips toward the 0.6600 level as chances to add to long positions or create bullish option spreads. Create your live VT Markets account and start trading now.

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