AUDUSD Holds Above 0.7000 as Traders Await Australian CPI

Key Takeaways

• AUDUSD trades near 0.70195 after an earlier rise towards 0.7033 faded, with price consolidating between 0.7010 and 0.7040.
• Australia’s CPI report is due Wednesday, 28 October, ahead of the RBA’s 3 November policy decision.
• Markets price a 66% chance of a 25-basis-point hike to 4.85%.
• Traders are watching 0.7030-0.70335 as resistance, with 0.7010-0.7013 and 0.7000 as key support levels.
• A sustained break above 0.7040 could open room above the current range if inflation surprises to the upside.

AUDUSD held above 0.7000 on Tuesday, 27 October, as traders waited for inflation data that could shape the RBA’s next move.

The market is trying to judge whether the data will confirm the case for further tightening or whether a hike is already priced in. Traders are now assessing whether buyers can keep defending support or whether the pair breaks lower once the figures land.

Why Traders Are Watching AUDUSD

Attention is centred on the quarterly trimmed mean figure, a gauge of underlying price pressures. Economists expect it to rise 1.0%, above the RBA’s August forecast of 0.8%. Annual underlying inflation is expected to stay at 3.6%, above the central bank’s 2%-3% target range, which keeps pressure on policymakers.

The RBA’s cash rate currently stands at 4.60%. A 25-basis-point increase on 3 November would lift it to 4.85%. Because a hike is already partly priced in, the reaction may depend on whether the data push those expectations higher.

Reaction to the data may also depend on what officials say. Governor Michele Bullock and other senior officials are expected to appear before lawmakers as the figures are released, and their comments could shape how traders read the policy outlook.

Key factors influencing AUDUSD include:

• Australian inflation: A stronger-than-expected CPI print could reinforce expectations of further RBA tightening.
• RBA rate expectations: With a hike partly priced in, the pair needs a hawkish surprise to extend gains.
• Official commentary: Hawkish remarks from Bullock and other officials could support the currency.
• US yields and data: Lower US yields and softer US economic data would give the Australian dollar extra support.

Key Trading Levels

AUDUSD is trading around 0.70195, close to the nine-period moving average near 0.7020. The latest rebound lost momentum after approaching 0.7033, and buyers have yet to establish a fresh breakout. Buyers have repeatedly returned around 0.7010, while sellers have appeared below 0.7040.

The 0.7030-0.70335 zone is the main short-term resistance, containing the latest rebound peak. Above it, 0.7040 marks the upper boundary of the visible range. An hourly close above 0.70335, followed by a successful retest, would bring 0.7040 into focus, and a sustained break could open room above the range.

On the downside, 0.7010-0.7013 is the first support, where buyers have repeatedly returned. Losing this zone could bring the 0.7000 psychological level into focus, followed by the 0.6995-0.6997 area near the earlier long lower wick. An hourly close below 0.7010 followed by a failed recovery would suggest sellers remain in control.

AUDUSD Prediction: Can the Range Break?

AUDUSD may extend its advance if inflation comes in stronger than expected, strengthening the case for further RBA tightening. Hawkish comments from officials, lower US yields and softer US data would add support. A close above 0.70335 that holds on a pullback would strengthen the bullish case.

However, the pair could slip if inflation is softer, the US dollar strengthens or risk appetite weakens. Even a hike may offer limited support if traders see it as the final increase. A break below 0.7010 that fails to reclaim that level could shift focus towards 0.7000 and 0.6995-0.6997.

The next catalysts are Australia’s CPI release, the officials’ testimony and the RBA’s 3 November decision.

For more information on the technical analysis, key trading levels and more, read the full article here.