AUD/USD: Aussie Rally Faces Major Test as U.S. Inflation Approaches
- Six-week rally: AUD/USD remains supported by broad U.S. dollar weakness.
- RBA expectations softened: Australian inflation has reduced expectations for an immediate rate hike.
- 0.7100–0.7120 is crucial: A breakout could target 0.7180, while rejection risks a move toward 0.7050–0.7000.
AUD/USD enters the new week close to 0.7100, extending a strong recent advance as broad dollar weakness continues to support the Australian dollar. The pair's rally is now approaching an important technical zone, however, with traders looking toward U.S. CPI and the Reserve Bank of Australia's policy decision for the next catalyst. Recent market analysis describes the Australian dollar as being on a six-week winning streak, but warns that the rally could face resistance around the 71-cent area.
AUD/USD Fundamental Analysis
The biggest driver remains the U.S. dollar. Friday's weak employment report increased expectations for easier Fed policy, creating a favorable environment for risk-sensitive currencies such as the Australian dollar. The upcoming U.S. CPI report is therefore critical: softer inflation could reinforce dollar selling, while a hotter reading could quickly revive expectations for tighter U.S. policy.
On the Australian side, markets have recently scaled back expectations for an immediate RBA rate hike following softer second-quarter inflation. That means AUD/USD is increasingly dependent on the dollar, global risk appetite and commodity sentiment rather than expectations of aggressive RBA tightening.
AUD/USD Technical Analysis
AUD/USD is approaching the 0.7100–0.7120 resistance region after its extended rally. A clean break above this zone could strengthen the bullish structure and expose 0.7180, while failure to break higher could trigger a pullback toward 0.7050 and potentially 0.7000.
Momentum remains positive, but traders should be careful about chasing the rally immediately ahead of U.S. CPI. A stronger-than-expected inflation reading could produce a sharp reversal in the pair.
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