AUD/USD Forecast: Dollar Dips as CPI Misses Forecast

• US consumer prices rose by 0.3% in April, a decline from the previous month’s 0.4% increase.
• US retail sales fell to 0.0% from 0.7% the previous month.
• Australia’s wage growth surprisingly slowed from 15-year highs in Q1.

The AUD/USD forecast shows a surge in bullish sentiment as the dollar plunges after a downbeat consumer inflation report. Consequently, there is a higher chance that the Fed will cut rates in September. Meanwhile, rate cuts in Australia might start in 2025, putting the Aussie in a stronger position against the dollar.

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US consumer prices rose by 0.3% in April, a decline from the previous month’s 0.4% increase. Meanwhile, on an annual basis, inflation came in line with expectations, dropping from 3.5% to 3.4%. This will likely give policymakers more confidence that the downtrend is intact. Therefore, after a short pause, consumer prices might continue lower. Notably, Powell maintained this outlook on Tuesday when he said inflation would still decline. 

Meanwhile, there was more relief for the Fed as retail sales fell to 0.0% from 0.7% the previous month. Economists had expected a smaller decline to 0.4%.

Elsewhere, data from Australia on Wednesday showed wage growth surprisingly slowed from 15-year highs in the first quarter, indicating looser labor market conditions. Annual wage growth fell from 4.3% to 3.8%. As a result, there is less pressure on the RBA to hike rates. 

Still, rate cuts might not start in Australia until next year. Moreover, there is still an 8% chance that the RBA will hike rates later in the year. This means the Aussie will keep its edge against the dollar.

AUD/USD key events today

Investors will keep absorbing the US consumer inflation as no more key reports are expected from Australia or the US.

AUD/USD technical forecast: Bullish momentum surges past solid resistance

On the technical side, the AUD/USD price has broken above the 0.6650 resistance barrier amid a surge in bullish momentum. At the same time, the RSI has entered the overbought region, showing solid bullish momentum and supporting a bullish bias.

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This surge comes after the price found support at its bullish trendline and the 30-SMA line. If the price closes above 0.6650, it will confirm a continuation of the larger bullish trend. However, if it pulls back below, it could reverse to the support trendline and 30-SMA support.

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