AUD/USD rises amid easing US inflation, stays firm around 0.6650s

AUD/USD surges 0.66%, eyes 0.6700 as US inflation shows signs of slowing, softening the US dollar.
Despite weaker Chinese data and lower CPI, AUD finds support from diminished expectations of aggressive Fed hikes.
Aussie’s surge and the US Dollar Index’s 0.48% drop reflect a reassessment of the Fed’s future tightening stance.

Christian Borjon Valencia FXStreet

AUD/USD climbs sharply and eyes a test of the 0.6700 figure after economic data from the United States (US) showed that inflation is cooling, weakening the US Dollar (USD) despite solid data revealed on Thursday. Hence, the Australian Dollar (AUD) gets a respite, and the AUD/USD pair exchanges hands at 0.6658, gaining 0.66% after hitting a daily low of 0.6603.

Cooling inflation in the US softens the greenback and boosts the Aussie, despite weaker Chinese data, subdued RBA expectations

The US economic docket showed plentiful data as the week, month, and quarter-end approaches. The US Department of Commerce delivered the US Federal Reserve (Fed) preferred gauge for inflation, the Core Personal Consumption Expenditures (PCE), which rose by 0.3% MoM, in line with estimates, below April’s 0.4%. Yearly data pointed lower to 4.6%, from 4.7% in the previous month, showing that inflation is becoming entrenched and not slowing at the pace projected by the Fed. Headline data showed that inflation edged much lower than monthly figures.

In other data, the Chicago National Activity Index PMI rose by 41.5, exceeding May’s 40.4 print, a slight improvement but shy of getting to expansionary territory. At the same time, the University of Michigan (UoM) Consumer sentiment survey rose by 64.4, above estimates and the preliminary reading of 63.9.

On the Australian front, the Aussie (AUD) remains pressured by weaker Chinese data, as factory data dented market sentiment during the Asian session. Expectations for additional tightening by the Reserve Bank of Australia (RBA) sank after the latest CPI report showed inflation dipping to a 13-month low. Hence, money market futures show six basis points of tightening by July, but investors expect rates to peak at around 4.50% by December 2023.

Following the release of the US data, the AUD/USD soared from around 0.6620 to 0.6650. That reflects traders expect the Fed to hike rates, but not as aggressively as expected, following upbeat Thursday’s data. Consequently, US Treasury bond yields are falling, while the US Dollar Index, a measure of the buck’s performance against a basket of six currencies, edged lower by 0.48%, exchanging hands at 102.925.

Regarding monetary policy by the Fed, odds for a 25-bps hike are still up at 87%, as shown by the CME FedWatch Tool, with traders still expecting another rate increase towards November 2023.

AUD/USD Price Analysis: Technical outlook

After diving to a weekly low of 0.6595, the AUD/USD bounced off the lows and rose above 0.6650, a psychological level. It should be said that for a bullish continuation, the AUD/USD must crack June’s 23 daily low of 0.6662 turned resistance to open the way to a confluence of daily EMAs, with the 20, 50, and 100 hoovering around the 0.6700 figure. Otherwise, the AUD/USD pair will be exposed to further selling pressure, with sellers eyeing the 0.6600 figure, the weekly low of 0.6590s, and the May 30 daily high turned support at 0.6559.

Upcoming events

Author

Christian Borjon Valencia

FXStreet

Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD gathers strength above 1.1750 as Fed rate cut prospects pressure US Dollar

The EUR/USD pair trades in positive territory around 1.1775 during the early Asian session on Monday. The prospect of a US Federal Reserve rate cut in 2026 weighs on the US Dollar against the Euro. Markets brace for US President Donald Trump to nominate a Fed chair to replace Jerome Powell, whose term ends in May.

GBP/USD edges lower near 0.7400, eyes Fed rate cut outlook

GBP/USD edges lower after a gap-up open, trading around 0.7410 during the Asian hours on Monday. However, the pair may gain ground as the US Dollar faces challenges, which could be attributed to growing expectations of two more rate cuts by the Federal Reserve in 2026.

Gold retreats from record highs, heads toward $4,550

Gold retreats after setting a new record-high at $4,550 earlier in the Asian session on Monday and eases toward $4,500 as trading volumes thin out ahead of the New Year break. The US Dollar bearish bias remains unabated on the back of dovish Fed expectations, which continues to act as a tailwind for the bullion amid persistent geopolitical risks.

Ethereum Annual Price Forecast: ETH poised for growth in 2026 amid regulatory clarity and institutional adoption

Ethereum lost 12% of its value in 2025, declining from $3,336 at the beginning of the year to $2,930 as of the third week of December, a stark contrast from 2024's 48% gain. But that percentage doesn't do justice to the wild year ETH had in 2025.

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Avalanche struggles near $12 as Grayscale files updated form for ETF

Avalanche trades close to $12 by press time on Wednesday, extending the nearly 2% drop from the previous day. Grayscale filed an updated form to convert its Avalanche-focused Trust into an ETF with the US Securities and Exchange Commission.