AUD/USD Climbs as Hot Inflation Revives RBA Hike Bets

Traders' Opinions

Summary:

AUD/USD approaches 0.7180 after stronger Australian inflation revived RBA tightening expectations. US PCE data and Jackson Hole now represent the main risks to further gains.

BUY AUDUSD

EXP

PENDING

0.71900

Entry Price

0.72700

0.70900

0.71727 +0.00101 +0.14%

Pips

PENDING

0.70900

Exit Price

0.71900

Entry Price

0.72700

AUD/USD pushes higher for a second consecutive session on Wednesday, climbing toward 0.7180 as stronger-than-anticipated Australian inflation figures strengthen the case for the Reserve Bank of Australia (RBA) to maintain a restrictive policy stance.

The latest inflation report delivered a clear upside surprise. Australia’s headline CPI increased 3.5% year-over-year in July, easing from June’s 3.8% but remaining well above the 3.2% economists had expected. Monthly inflation was equally firm, rising 1.0% following June’s 0.1% decline and exceeding expectations for a 0.8% increase.

More importantly for the RBA, underlying inflation remains sticky. The Trimmed Mean CPI rose 0.5% on the month and 3.6% annually, suggesting that domestic price pressures are proving difficult to contain.

That matters because markets have been relatively conservative in pricing the RBA's next move. MUFG notes that a full rate increase is not currently reflected in market pricing until February 2027. However, the minutes from the RBA's August meeting suggested policymakers may be prepared to act sooner if inflation remains persistent.

Wednesday's inflation surprise strengthens the argument that markets may be underpricing the possibility of another RBA hike. If incoming labour-market and inflation figures remain firm, expectations could shift toward earlier tightening, potentially providing the Australian Dollar with another source of support.

The picture is less straightforward on the US side. The Dollar is finding some demand ahead of the US PCE inflation report, while traders are also reluctant to take large positions before Fed Chair Kevin Warsh's Jackson Hole appearance on Friday. Any indication that the Fed remains open to a September rate increase could temporarily slow AUD/USD's advance.

At the same time, easing geopolitical anxiety is reducing some of the defensive demand that previously supported the Greenback. Reports of discussions between Iran and Oman over a temporary maritime corridor through the Strait of Hormuz have raised hopes that shipping conditions could gradually improve, although negotiations remain ongoing.

For AUD/USD, the combination of sticky Australian inflation, rising RBA tightening risk and softer safe-haven demand for the US Dollar keeps the near-term bias tilted higher. The main threat to that outlook would be a stronger-than-expected US inflation reading or a distinctly hawkish message from the Fed later this week.

Technical Analysis

AUD/USD is pressing against a major breakout area around 0.7170–0.7180 after maintaining a strong recovery from the late-June lows. The 4-hour structure has progressively shifted in favour of buyers, with successive higher lows showing that demand has remained firm throughout the advance.

The current resistance is particularly important because it has repeatedly influenced price action over the past several months. A convincing break and hold above 0.7180 would confirm that buyers have cleared this barrier and could allow the rally to accelerate toward the 0.7270–0.7280 region, where the May highs provide the next major technical objective.

Some consolidation around current levels would not necessarily undermine the bullish outlook. After such a strong run, a retest of the breakout area would be technically healthy. Below current price, 0.7090–0.7100 stands out as the main support zone and should attract renewed demand if AUD/USD experiences a deeper pullback.

The bullish scenario would begin to lose strength if price falls decisively back beneath 0.7090. That would suggest the breakout attempt has failed and could drag the pair toward 0.6980–0.7000. Until then, the broader setup continues to favour buying weakness, with 0.7270 remaining the primary upside target.

TRADE RECOMMENDATION

BUY AUD/USD

ENTRY PRICE: 0.7190

STOP LOSS: 0.7090

TAKE PROFIT: 0.7270

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AUD/USD Climbs as Hot Inflation Revives RBA Hike Bets

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