AUDUSD is testing the psychologically important 0.7000 level, supported by improving risk sentiment and a stronger-than-expected 76.3k increase in Australian employment in June.
Attention now turns to Australia’s second-quarter inflation report. Price pressures are expected to ease from their recent peak but remain above the Reserve Bank of Australia’s 2%–3% target range.
Key drivers for AUDUSD
A softer underlying inflation reading would strengthen expectations that the RBA will keep interest rates unchanged at its next meeting. However, persistently elevated core inflation could keep further policy tightening on the table and provide additional support for the Australian dollar.
Data to monitor
• Monthly CPI is forecast to rise by 0.2%, following a 0.7% decline in the previous month.
• Annual inflation is expected to remain unchanged at 4.0%.
• Annual trimmed-mean inflation is forecast to accelerate to 3.7%.
• Quarterly trimmed-mean inflation is expected to reach 0.9%.
• Headline quarterly CPI is projected to slow to 0.7% from 1.4%, pointing to some moderation in overall price pressures.
The trimmed-mean reading is likely to be the main market driver, as it is the RBA’s preferred measure of underlying inflation.
Australia CPI
Wednesday, 29 July
01:30 GMT / 05:30 GST
Technicals
AUDUSD remains within a 10-day consolidation range and is trading between its 21-day and 50-day moving averages. A sustained break above 0.7000 could strengthen the bullish case, while failure to hold this level may keep the pair range-bound.
