Insights 
VT 
AUD/USD has been advancing for five consecutive days, buoyed by a weakening US Dollar. The focus is now on Australia’s Q3 CPI data and the Federal Reserve’s upcoming policy decision. The pair trades around 0.6586, marking its highest level in over two weeks, breaking above key SMAs near 0.6550.
Key inflation data from Australia is due soon, influencing the Reserve Bank of Australia’s future policy. Quarterly inflation is expected to rise 1.1% from 0.7% in Q2, with an annual CPI forecast at 3.0%, up from 2.1%. The RBA’s trimmed mean CPI could climb 0.8% QoQ, steady at 2.7% YoY.
September CPI Projection
In September, monthly CPI is projected at 3.1%, slightly up from August. A stronger inflation print might impact the RBA’s stance at its November meeting. The Fed is anticipated to cut rates by 25 basis points, a move factored into the markets.
Technically, AUD/USD has shown bullish momentum, breaking above a short-term consolidation range, supported at 0.6550, with next resistance near 0.6600. A break above 0.6629 could lead to testing 2023 highs around 0.6707. Support levels are at 0.6550 and 0.6520.
We’ve just seen the Australian inflation numbers for the third quarter come in hot at 3.2% year-over-year, surprising the market which was looking for 3.0%. This immediately pushed the AUD/USD through the 0.6600 resistance level, confirming the bullish momentum we saw building. The focus now shifts to the October swing high near 0.6629.
Impact on Reserve Bank of Australia
This stronger-than-expected inflation print significantly changes the game for the Reserve Bank of Australia’s November 4th meeting. The futures market now implies a nearly 40% chance of a rate hike, a sharp increase from the 15% probability priced in just yesterday. This makes buying short-dated AUD call options an attractive strategy to capture further upside potential, especially recalling how the RBA held rates firm through late 2024 in response to sticky inflation.
All eyes are now on the Federal Reserve’s decision later today, where a 25-basis-point rate cut is still widely anticipated. Recent data showing a slight uptick in US jobless claims to 220,000 and softer retail sales figures from last week support this dovish expectation. This policy divergence between a potentially hawkish RBA and a dovish Fed provides a strong fundamental tailwind for the Aussie.
From a technical standpoint, the former resistance around 0.6550, which is a cluster of key moving averages, now serves as a solid floor for any pullbacks. As long as we hold above this level, the path of least resistance is higher, targeting the year-to-date high around 0.6707. We should consider using any dips toward the 0.6600 level as opportunities to add to long positions or structure bullish option spreads.
