AUD/USD Fails to Test November High Ahead of Australia CPI

Australian Dollar Outlook: AUD/USD

AUD/USD falls for the third consecutive day after failing to test the November high (0.6688), and the exchange rate may continue to give back the rebound from the monthly low (0.6455) as it carves a series of lower highs and lows.

AUD/USD Fails to Test November High Ahead of Australia CPI

AUD/USD continues to fall from a fresh yearly high (0.6625) amid a further recovery in the US Dollar, and Australia’s Consumer Price Index (CPI) may keep the exchange rate under pressure as the update is anticipated to show slowing inflation.

Australia Economic Calendar

Even though the monthly update is anticipated to show the CPI holding steady at 2.1% in June, the core rate of inflation is expected to print at 2.7% in the second quarter compared to the 2.9% reading from the previous period.

Evidence of slowing price growth may encourage the Reserve Bank of Australia (RBA) to further unwind its restrictive policy as ‘the Board continues to judge that the risks to inflation have become more balanced,’ and speculation for a looming rate-cut but produce headwinds for the Australian Dollar as  ‘a minority of members judged that there was a case to lower the cash rate target’ at the July meeting.

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However, a higher-than-expected CPI print may generate a bullish reaction in the Australian Dollar as it raises the RBA’s scope to keep interest rates on hold, and the recent weakness in AUD/USD may turn out to be temporary should it defend the rebound from the monthly low (0.6455).

With that said, recent price action may lead to a further decline in AUD/USD as it carves a bearish price series, but the exchange rate may stage further attempts to test November high (0.6688) as it registers fresh yearly highs in July.

AUD/USD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; AUD/USD on TradingView  

• AUD/USD carves a series of lower highs and lows after failing to test the November high (0.6688), and a close below the 0.6510 (38.2% Fibonacci retracement) to 0.6550 (61.8% Fibonacci retracement) zone may push the exchange rate toward the monthly low (0.6455).
• Failure to hold above 0.6430 (50% Fibonacci retracement) may lead to a test of the June low (0.6373), with the next area of interest coming in around 0.6310 (38.2% Fibonacci retracement).
• At the same time, AUD/USD may defend the rebound from the monthly low (0.6455) if it struggles to close below the 0.6510 (38.2% Fibonacci retracement) to 0.6550 (61.8% Fibonacci retracement) zone, with a breach above the monthly high (0.6625) bringing the November high (0.6688) back on the radar.

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--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong