AUD/USD Price Forecast: Post-Aussie CPI rally falters amid geopolitical risks, ahead of US data

The AUD/USD pair reversed an intraday slide that followed the release of softer Australian consumer inflation figures and shot to a 15-month high on Wednesday, though it lacks follow-through buying. The Australian Bureau of Statistics reported that the headline Consumer Price Index (CPI) slowed from 3.8% YoY to 3.4% in November, undershooting expectations for a reading of 3.7%. Meanwhile, the Trimmed Mean CPI rose 0.3% during the reported month and the annual rate eased modestly to 3.2% from 3.3% in October. The data pointed to signs that inflation might be cooling enough to prevent the Reserve Bank of Australia (RBA) from raising interest rates as early as next month and prompted some intraday selling around the Australian Dollar (AUD).

The initial market reaction, however, turns out to be short-lived amid prospects of a near-term RBA policy tightening. In fact, traders see a 35% chance of a hike in February, while a liftoff by May is almost fully priced in, trigging an intraday AUD/USD rally of around 50-pips. However, rising geopolitical tensions undermine the US Dollar's (USD) safe-haven status and act as a headwind for the risk-sensitive Aussie. In fact, US President Donald Trump openly signaled that Colombia and Mexico could also face US military action as part of a widening campaign against criminal networks and regional instability following the weekend strikes on Venezuela. Moreover, the White House said that Trump is discussing options for acquiring Greenland.

This comes on top of the lack of progress in the Russia-Ukraine peace deal, unrest in Iran, and issues surrounding Gaza, which keeps geopolitical risks in play and lends some support to the buck. That said, any meaningful USD appreciation seems elusive in the wake of the growing acceptance that the Federal Reserve (Fed) will lower borrowing costs in March and deliver another rate cut by the end of this year. Traders largely shrugged off Richmond Fed President Thomas Barkin's hawkish remarks on Tuesday, saying that further changes to the short-term rate will need to be tuned to incoming data amid the risks to both the central bank's employment and inflation goals. This, along with concerns about the Fed's independence, might cap the USD.

Moreover, dovish Fed expectations mark a significant divergence in comparison to the RBA outlook and favor the AUD/USD pair. Hence, any meaningful corrective pullback might still be seen as a buying opportunity and remain limited. Traders might also opt to wait for this week's important US macro releases for more cues about the Fed's rate-cut path and before placing fresh directional bets. Wednesday's US economic docket features the ADP report on private-sector employment, ISM Services PMI, and JOLTS Job Openings data. The focus, however, will be on the crucial US Nonfarm Payrolls (NFP) report on Friday. This, along with the latest US consumer inflation figures next Tuesday, should provide some meaningful impetus.

AUD/USD 4-hour chart

Technical Analysis:

The 100-period Simple Moving Average (SMA) slopes higher near 0.6673, and price holds above it, keeping the short-term bias pointed upward. That average serves as initial dynamic support. The Moving Average Convergence Divergence (MACD) histogram remains marginally positive with the MACD line above the signal near the zero mark, but narrowing bars suggest momentum is cooling. The Relative Strength Index prints 60 (neutral-bullish) after backing off earlier overbought readings, indicating moderated buying pressure.

While the AUD/USD pair stays above the rising 100-period SMA, pullbacks would be viewed as corrective, and the path of least resistance would remain to the upside. A renewed uptick in MACD and a push in RSI back toward the mid-60s could open the door to fresh gains, whereas a 4-hour close beneath the average would undermine the bullish bias and could usher in a broader consolidation.

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