AUD/USD Forecast: Seems poised to build on hot Aussie CPI-led rise amid hawkish RBA bets

The AUD/USD pair catches aggressive bids on Wednesday and rallies to an over one-week high – levels just above the 0.6500 psychological mark – amid a combination of supporting factors. The Australian Dollar (AUD) gets a strong lift in reaction to hot domestic consumer inflation figures, which dampened hopes for more policy easing by the Reserve Bank of Australia (RBA). Apart from this, some follow-through US Dollar (USD) contributes to the strong intraday rise, marking the fourth day of a positive move.

Data published by the Australian Bureau of Statistics showed that the headline Consumer Price Index (CPI) accelerated from a 3.5% increase reported in the previous month to 3.8% year-on-year in October. Moreover, the reading was higher than consensus estimates. Adding to this, the RBA Trimmed Mean CPI rose 3.3% during the reported month, up from 3.2% in September. This indicated that the underlying inflation remains well above the RBA’s 2% to 3% annual target and raises questions about just how much headroom the central bank has to cut interest rates further. Investors sharply pared bets that the RBA might deliver one last rate cut in May next year to just 8%, from 40% before, and now see a 32% chance of a rate hike by the end of next year. This, in turn, prompts aggressive intraday short-covering around the Aussie.

The USD, on the other hand, drops to a one-week low as the US data released on Tuesday pointed to signs of cooling inflation and reinforced dovish Federal Reserve (Fed) expectations. The Bureau of Labour Statistics reported that the US Producer Prices Index rose 2.7% in September from a year earlier, slightly above the 2.6% in the previous month and broadly in line with expectations. Stripping out food and energy, the core gauge was up 2.9% over the year compared to the 2.7% forecast and the 2.8% increase recorded in August. Separately, the US Census Bureau reported that Retail Sales rose 0.2% on a monthly basis in September. The reading was below consensus estimates for a 0.4% growth and follows a 0.6% increase in August. Adding to this, the Conference Board's Consumer Confidence Index dropped to a seven-month low in November.

This comes on top of comments from New York Fed President John Williams last Friday, saying that interest rates could fall in the near term without putting the central bank's inflation goal at risk. Furthermore, Fed Governor Christopher Waller noted earlier this week that the job market is weak enough to warrant another quarter-point rate cut at the December meeting. Fed Governor Stephen Miran echoed the dovish view and said in a television interview on Tuesday that a deteriorating job market and the economy call for large interest rate cuts to get monetary policy to neutral. Traders were quick to react and are now pricing in an 85% chance that the US central bank will cut rates by 25 basis points next month. This, along with the upbeat mood, undermines the safe-haven buck and further benefits the perceived riskier Aussie.

Traders now look forward to the delayed release of US Durable Goods Orders, which, along with the usual US Weekly Initial Jobless Claims, might drive the USD demand. Apart from this, speeches from influential FOMC members could provide some impetus to the USD and the AUD/USD pair. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside and backs the case for an extension of the recent recovery from a three-month low, touched last week. Hence, any meaningful corrective pullback might now be seen as a buying opportunity and is more likely to remain cushioned amid the divergent RBA-Fed policy expectations.

AUD/USD 4-hour chart

Technical Analysis

From a technical perspective, the 200-period Simple Moving Average (SMA) slopes lower near the 0.6510 region, capping the upside for the AUD/USD pair. The Moving Average Convergence Divergence (MACD) line extends above the Signal line, both above zero, while the positive histogram widens, suggesting strengthening bullish momentum. The Relative Strength Index (RSI) sits at 63, reflecting firm buy-side tone without overbought stress. This, in turn, backs the case for additional gains beyond the 0.6540 intermediate horizontal hurdle, towards the monthly swing high, around the 0.6580 region.

The move up could extend towards the 0.6550 region, representing a descending trend-line barrier extending from the year-to-date peak, touched in September. The said trend-line constitutes the formation of a falling wedge. Hence, a sustained strength beyond will be seen as a fresh trigger for the AUD/USD bulls and pave the way for a further near-term appreciating move.

On the flip side, the 0.6465-0.6460 area now seems to protect the immediate downside ahead of the 0.6420 zone, or a three-month low, touched last week. The latter coincides with the falling wedge support, which, if broken, would negate the positive outlook and shift the near-term bias in favor of bearish traders. Spot prices might then weaken further below the 0.6400 mark, towards the late June swing low, around the 0.6375-0.6370 region, before dropping to the 0.6330 intermediate support en route to the 0.6300 round figure.

(The technical analysis of this story was written with the help of an AI tool)