AUDUSD Falls After Softer Australian Inflation Data

Key Points

• AUD/USD fell below 0.6950 and reached its weakest level in around two weeks after Australia’s June inflation figures undershot market expectations.
• Australia’s monthly CPI slowed to 3.8% year-on-year in June from 4.0% in May, while prices declined 0.1% month-on-month.
• Quarterly trimmed mean inflation rose 0.8% and reached 3.6% annually, below market expectations and the RBA’s previous forecast.
• Markets reduced the probability of an August RBA rate increase to around 4% from 21% before the data, while the estimated chance of another increase before year-end fell to approximately 50%.

The Australian Dollar fell after softer inflation reduced expectations of an RBA rate increase in August. AUD/USD dropped around 0.3% to 0.6953, near a two-week low, while a firm US Dollar added pressure.

Monthly inflation slowed to 3.8% in June, while quarterly CPI eased to 4.0%. Core inflation reached 3.6%, below market and RBA forecasts.

Although inflation remains above the RBA’s 2%–3% target, the softer data reduced the immediate need for another rate increase.

Why Traders Are Watching the Aussie Dollar

Softer inflation sharply reduced expectations for another RBA rate increase. The chance of an August hike fell from 21% to 4%. Meanwhile, the probability of a move by year-end dropped to around 50%. Australian three-year bond yields also fell by about 10 basis points, reducing the Aussie Dollar’s yield appeal.

However, further tightening remains possible. RBA Governor Michele Bullock said underlying inflation was still too high and that the Bank was prepared to raise rates again if needed.

AUD/USD will also depend on the Federal Reserve. A hawkish decision could strengthen the US Dollar and pressure the pair, while cautious guidance may support stabilisation.

Key AUD/USD Trading Levels

AUD/USD is trading around the 0.6950 area after recovering from recent lows near 0.6880.

The pair has struggled to break above the 0.7000 resistance zone, suggesting buyers are facing pressure near higher levels. A sustained move above this area could improve the short-term outlook, while a break below 0.6920 may shift focus back towards the recent lows.

Bullish and Bearish Setups

AUD/USD remains at a technical crossroads as traders assess US dollar movements, Australian economic expectations and broader risk sentiment.

The bullish scenario would require buyers to regain control above the 0.7000 resistance area. A sustained move above 0.7020 could strengthen recovery momentum and open the path towards higher levels.

The bearish scenario strengthens if AUD/USD falls below the 0.6920 support level. A continued decline could increase selling pressure towards the 0.6880 support zone, with a break below this area potentially exposing further downside.

Disclaimer

The price levels and market scenarios above reflect the author’s view at the time of writing and do not represent financial advice or an official recommendation from VT Markets. Traders should conduct their own analysis and manage risk carefully.

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The Australian Dollar remains sensitive to inflation data, RBA policy expectations, commodity-market developments and changes in global risk sentiment.

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Australian Dollar CFDs allow traders to take a view on movements in AUD/USD and other AUD pairs without directly owning or exchanging the underlying currencies.

This provides flexibility when markets react to Australian inflation, employment figures, RBA decisions, Federal Reserve announcements and changes in global market sentiment.

AUD/USD offers direct exposure to the relative outlooks for Australia and the United States. AUD crosses such as AUD/JPY and AUD/NZD can provide a different perspective by removing the US Dollar and focusing on other central-bank or regional developments.

What to Watch Next

The immediate focus for AUD/USD is the Federal Reserve’s policy decision and its guidance on the future path of US interest rates. A firmer US Dollar could maintain pressure on the pair, while a less hawkish message may help the Australian Dollar recover some of its CPI-driven decline.

Traders will also monitor:

• RBA meeting on 11 August: Policymakers will assess whether the earlier rate increases and moderating domestic demand are sufficient to bring inflation back towards target.
• RBA Statement on Monetary Policy: Updated economic and inflation forecasts are scheduled for 11 August and may provide further guidance on the rate outlook.
• Australian labour and activity data: Signs of a weaker labour market or softer consumer demand could further reduce tightening expectations.
• US Dollar and Treasury yields: Changes in Federal Reserve expectations may influence the interest-rate differential between Australia and the United States.
• Oil prices and geopolitical developments: Energy costs remain relevant to both inflation expectations and broader risk sentiment.
• Chinese economic indicators: Australia’s trade exposure means changes in Chinese growth and commodity demand can influence Australian Dollar sentiment.
• Next Australian CPI release: The ABS is scheduled to publish July inflation data on 26 August 2026.

From a technical perspective, 0.6950 is the first recovery level to watch. A sustained return above 0.7000 could improve momentum, while a break below 0.6900 may expose AUD/USD to a deeper correction.

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