AUDUSD Drops Below 0.6965 as Australia CPI Misses Forecast

Key Points

• AUDUSD fell below 0.6965 after Australia’s latest CPI data came in softer than expected, putting renewed pressure on the Australian dollar.
• Australia’s headline CPI rose 4.0% YoY, below the 4.1% forecast, although inflation accelerated from the previous 3.5% reading.
• Monthly CPI increased 0.4%, missing expectations of 0.5% and slowing significantly from the previous 1.0% increase.
• Trimmed Mean CPI eased to 0.2% MoM, below the 0.3% forecast, signalling weaker underlying inflation momentum.
• AUDUSD experiences a sharp rejection from the 0.6990–0.6995 resistance zone, followed by a high-volume sell-off toward 0.6960.
• Traders are monitoring whether the pair can regain 0.6965 or whether further downside pressure develops towards lower support levels.

Market Move

AUDUSD initially consolidated around the 0.6985–0.6990 region, holding relatively steady before Consumer price index (CPI) data triggered renewed selling pressure. Price then broke below the short-term moving average and accelerated lower, reaching an intraday low near 0.69590.

The break below 0.6965 shows that traders are leaning toward a more dovish interpretation of the CPI data. Continued trading below this level could keep downside pressure in focus, while a recovery above 0.6965 may signal that the initial selling is beginning to stabilise.

The immediate market focus is whether buyers can stabilise the pair above 0.6960.

Why Traders Are Watching

The weaker Australian inflation data has shifted attention towards the RBA’s future policy decisions.

Although inflation remains above the RBA’s 2–3% target range, the slowdown in monthly and trimmed mean inflation suggests that price pressures may be losing momentum. This could reduce expectations for additional rate increases, which may weigh on the Australian dollar.

Additionally, US dollar movement and Federal Reserve expectations influence dollar demand, potentially adding pressure on AUDUSD.

Key Trading Levels

The 0.6965 level acts as the immediate pivot, with a move back above this area potentially signalling that selling pressure is easing and opening the way towards the 0.6990–0.6995 resistance zone. Above this region, traders may watch the psychological 0.7000 level as the next major upside barrier.

On the downside, 0.6960 remains the immediate support level where buyers are attempting to stabilise the pair, while a break below this area could expose AUDUSD towards the next support around 0.6950.

Bullish and Bearish Setup

A bullish setup would develop if AUDUSD manages to hold above the 0.6960 support zone and recover above 0.6965. This would suggest that the recent CPI-driven sell-off may have stabilised, with buyers returning after the initial market reaction.

A bearish setup remains possible if AUDUSD continues trading below 0.6965, showing that sellers are maintaining control after the CPI-related decline.

Disclaimer

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

AUDUSD Predictions: What’s Next?

AUDUSD could face further downside pressure if weak Australian inflation data continues to reduce expectations for additional RBA tightening. A more sceptical RBA outlook, combined with stronger US economic data or rising US Treasury yields, could support the US dollar and weigh on the pair.

On the other hand, AUDUSD could recover if upcoming Australian economic indicators show stronger growth momentum, RBA officials maintain a more hawkish stance, or global risk sentiment improves. Higher commodity prices and stronger demand expectations from China, a major trading partner of Australia, could also provide support for the Australian dollar.

Upcoming RBA commentary and labour data are key factors to monitor as it further clues on the central bank’s policy direction.

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