AUD/USD Cautious after Australian Inflation Moderation
AUD/USD Analysis
The Reserve Bank of Australia has maintained a hawkish stance as it still contemplates further tightening, despite 425 basis points of hikes since May 2022. It has also ruled out a shift to monetary easing and rate cuts in the near term, with Governor Bullock saying that such action "doesn't align with the Board's current thinking" [1], as inflation and wages remain elevated.
Today's monthly data showed that CPI moderated to 3.5 y/y in July, but the print remains lofty and was actually higher than expected. To a certain extent this vindicates the RBA's devotion to the restrictive stance and the apprehension towards removing restraint.
This hawkish stance along with market optimism for multiple cuts by the Fed, have led AUD/USD to a profitable month and highest levels since January. This gives bull the opportunity to push for new 2024 highs and challenge 0.6900, although further gains towards and beyond 0.7030 may prove harder.
On the other hand, Australian inflation print showed substantial deceleration on headline and core measures, which challenge the RBA's commitment to tight monetary setting. With its major peers having already embarked on the lower rates path, Australian policymakers may have a hard time staying restrictive for long. Furthermore, Fed Chair Powell may have signaled a pivot in Jackson Hole [2], but he did not offer any insight as to the size and pace of easing, while market pricing for four cuts this year appears excessive.
On the technical front, the RSI has not followed price action higher, in a divergence that could lead to pressures towards the EMA200 (black line). Daily clauses below it would pause the upside bias but sustained weakness is not justified by the monetary policy differential.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 28 Aug 2024 https://rba.livecrowdevents.tv/MediaConferenceMonetaryPolicyDecision6August | |
| Retrieved 13 May 2026 https://www.youtube.com/watch |
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