AUDUSD Falls Below 0.6965 as Australia CPI Weakness Raises RBA Concerns

Key Takeaways

• AUDUSD declined below 0.6965 after Australia’s latest CPI data came in below market expectations, increasing pressure on the Australian dollar.
• Australia’s headline CPI rose 4.0% YoY, slightly below the 4.1% forecast, although inflation accelerated from the previous 3.5% reading.
• Monthly CPI increased 0.4%, missing expectations of 0.5% and slowing sharply from the previous 1.0% gain.
• Trimmed Mean CPI eased to 0.2% MoM, below the 0.3% forecast, pointing to softer underlying inflation momentum.

AUDUSD moved lower after softer Australian inflation data shifted market expectations around the Reserve Bank of Australia’s policy outlook.

The pair initially held near the 0.6985–0.6990 region before CPI data triggered renewed selling pressure. Price then broke below short-term support and moved towards an intraday low around 0.69590.

Why Traders Are Watching AUDUSD

The latest Australian CPI report has placed the RBA’s future policy direction back in focus.

Although inflation remains above the RBA’s 2–3% target range, the slowdown in monthly CPI and trimmed mean inflation suggests that underlying price pressures may be easing. This could reduce expectations for additional rate increases and weigh on demand for the Australian dollar.

At the same time, AUDUSD remains sensitive to US dollar movements, Federal Reserve expectations and Treasury yield changes. A stronger US dollar environment could add further downside pressure on the pair.

Key factors influencing AUDUSD include:

• Australian inflation trends: Softer CPI data may reduce expectations for further RBA tightening.
• RBA policy outlook: Future comments from policymakers could influence expectations around interest rates.
• US dollar strength: Changes in Federal Reserve expectations and US economic data may impact AUDUSD direction.
• Risk sentiment: As a risk-sensitive currency, the Australian dollar can be influenced by broader market confidence.
• Commodity demand: Movements in commodities and China’s economic outlook may affect Australian dollar demand.

Key Trading Levels

AUDUSD is trading near 0.6960 after breaking below the 0.6965 pivot level.

The 0.6965 level remains the first key resistance zone. A recovery above this area could indicate that selling pressure is easing and potentially open the path towards 0.6990–0.6995, where sellers previously regained control.

A move above 0.6995 could bring the psychological 0.7000 level back into focus.

On the downside, 0.6960 remains the immediate support area. A break below this level could expose AUDUSD towards 0.6950, which represents the next potential support zone.

AUDUSD Prediction: Can the Pair Recover Above 0.7000?

AUDUSD could remain under pressure if weaker Australian inflation continues to reduce expectations for further RBA rate hikes. A more dovish policy outlook, combined with stronger US economic data or higher Treasury yields, could support the US dollar and weigh on the pair.

However, AUDUSD may find support if upcoming Australian economic data shows improving growth momentum, RBA officials maintain a more cautious stance on rate cuts, or global risk sentiment strengthens. Higher commodity prices and improved demand expectations from China could also provide support for the Australian dollar.

For a deeper analysis of AUDUSD technical levels, inflation trends and potential market scenarios, read this article.