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AUD/USD Price Analysis: Aussie Rallies on Inflation Surge

  • Inflation in Australia rose at an annual rate of 4.0% in May.
  • The likelihood of an RBA rate hike in November rose to 60%.
  • Markets eagerly await the US PCE price index report on Friday.

The AUD/USD price analysis paints a bullish picture, with the Aussie soaring on an unexpected jump in Australia’s inflation. The risks of an RBA rate hike increased. Meanwhile, the dollar was also steady after slightly hawkish Fed remarks.

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Data on Wednesday showed that inflation in Australia rose at an annual rate of 4.0% in May from 3.6% in the previous month. Furthermore, this was a bigger jump than the forecast of 3.8%. After the report, investors raised the chances of a Reserve Bank of Australia rate hike this year and lowered the chances of a cut. The chances of a hike in September rose slightly above 50%. At the same time, the likelihood of one in November rose to 60%. Meanwhile, investors do not expect a rate cut until late 2025. 

This inflation report gives the Australian dollar a stronger edge over its peers. While other major central banks begin their rate-cutting cycles, the RBA is more likely to hike. 

On the other hand, the dollar firmed as policymakers maintained a cautious tone despite the recent decline in inflation. Michelle Bowman and Lisa Cook kept from saying when a Fed rate cut will occur. Although there is more confidence that the US central bank will eventually cut rates, they said it would depend on incoming data.

Therefore, markets eagerly await the PCE price index report on Friday. This might give more clues on the timing for rate cuts. Economists expect the report to show inflation eased to 2.6% in May, the slowest in three years.

AUD/USD key events today

  • US New Home Sales

AUD/USD technical price analysis: Bulls eye range resistance amid consolidation

AUD/USD technical price analysis
AUD/USD 4-hour chart

On the technical side, the AUD/USD price has made a sharp, bullish move and has broken above the 30-SMA line. Consequently, there was a surge in bullish momentum. This can also be seen in the RSI, which trades above 50 in bullish territory. 

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However, the price has remained in consolidation for a long time between the 0.6580 support and the 0.6700 resistance levels. Therefore, there is no clear direction in the market. Still, bulls are eyeing the 0.6700 resistance level. A break above would signal the start of a bullish trend. On the other hand, the consolidation will continue if the resistance level holds firm.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.