- Inflation in Australia rose at an annual rate of 4.0% in May.
- The probability of an RBA rate hike in November has risen to 60%.
- Markets are eagerly awaiting the US PCE price index report on Friday.
AUD/USD price analysis paints a bullish picture, with the Aussie rising due to an unexpected spike in inflation in Australia. The risks of an RBA rate hike have increased. Meanwhile, the dollar was also steady after somewhat hawkish remarks from the Fed.
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Data on Wednesday showed inflation in Australia rose at an annual rate of 4.0 percent in May from 3.6 percent in the previous month. Moreover, this was a bigger jump than the forecast of 3.8%. Following the report, investors increased odds of a Reserve Bank of Australia interest rate hike this year and reduced odds of a rate cut. Chances for a raise in September rose to just above 50%. At the same time, the probability that it will happen in November has increased to 60%. Meanwhile, investors do not expect a rate cut until the end of 2025.
This inflation report gives the Australian dollar a stronger edge over its peers. As other major central banks begin their rate cut cycles, the RBA is more likely to hike.
On the other hand, the dollar strengthened as policy makers maintained a cautious tone despite the recent drop in inflation. Michelle Bowman and Lisa Cook did not say when the Fed would cut rates. While there is more confidence that the U.S. central bank will eventually cut rates, they say that will depend on incoming data.
Therefore, markets are eagerly awaiting the PCE price index report on Friday. This could give more clues about the timing of the rate cut. Economists expect the report to show that inflation eased to 2.6% in May, the slowest in three years.
AUD/USD key events today
AUD/USD Price Technical Analysis: Bulls Range Resistance Amid Consolidation
On the technical side, the AUD/USD price made a sharp, bullish move and broke above the 30-SMA line. Consequently, there was an increase in bullish momentum. This can also be seen in the RSI, which is trading above 50 in bullish territory.
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However, the price remained in consolidation for a long time between the support level of 0.6580 and the resistance level at 0.6700. Therefore, there is no clear direction in the market. However, the bulls are eyeing the 0.6700 resistance level. A break above would signal the start of a bullish trend. On the other hand, consolidation will continue if the resistance level remains firm.
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