- Australia’s Consumer Price Index report showed inflation rose by 2.7%.
- RBA policymakers said they would look beyond falling headline inflation.
- Data on Tuesday showed an unexpected drop in US consumer confidence.
AUD/USD price analysis shows a slight pullback in the bullish trend after falling inflation in Australia increased the likelihood of an RBA rate cut. Meanwhile, the US dollar was weak after data in the previous session revealed growing concerns about the labor market.
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Australia’s consumer price index report showed inflation rose 2.7% in August, the lowest level in three years. Moreover, it was a significant drop compared to the previous month of 3.5%. However, the Australian dollar barely fell as economists had expected a decline. However, he improved the chances of an RBA rate cut in December to 75%.
The Reserve Bank of Australia recently kept rates unchanged and noted that it was premature to consider cutting interest rates. Moreover, policymakers said they would look beyond the fall in headline inflation, which was only temporary. Therefore, more is needed to encourage a more dovish outlook as core inflation remains high. Namely, price pressures were reduced in August due to electricity subsidies from the federal government. The RBA will come under greater pressure to reduce borrowing costs if core inflation eases.
Meanwhile, the dollar remained weak after Tuesday’s data showed an unexpected drop in consumer confidence. The Conference Board’s consumer confidence reading fell from 105.6 to 98.7 in September. More consumers expressed concern about the labor market, noting that it is more difficult to get a job.
Furthermore, market participants are eagerly awaiting the key PCE data due on Friday. Higher-than-expected inflation could raise expectations for a massive Fed rate cut in November.
AUD/USD key events today
Market participants do not expect any key reports from the US. So they will continue to digest the Australian CPI report.
AUD/USD Price Technical Analysis: Bulls pause for a breather at 0.6900


On the technical side, the AUD/USD price paused its growth near the key level of 0.6900. Although retreating, the bullish bias remains strong. The price is still trading well above the 30-SMA and the RSI is near the overbought region.
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However, after such a strong rally, the bulls seem exhausted. The RSI made a bearish divergence, showing weaker bullish momentum. Therefore, the price could pull back to retest the 30-SMA before making new highs. However, if the bears challenge the SMA support and win, AUD/USD is likely to start falling.
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