Australian Dollar Holds Near 0.6620 as Traders Await US CPI

The Australian Dollar (AUD) trades slightly weaker on Thursday, even as domestic inflation expectations rise. The AUD/USD pair hovers near 0.6620, with traders cautious ahead of the US Consumer Price Index (CPI) release later today.

RBA Policy Outlook Supports the Aussie

Australia’s Consumer Inflation Expectations jumped to 4.7% in September, up from August’s 3.9%. The rise reflects stronger domestic demand and renewed concerns about inflationary pressures. This development has reduced the likelihood of near-term Reserve Bank of Australia (RBA) rate cuts.

According to market swaps, there’s now an 86% chance the RBA will keep policy unchanged in September. Governor Michele Bullock noted that the private sector is showing “a little bit more growth,” a positive sign for the economy.

Recent strong GDP, Trade Surplus, and inflation data have also limited expectations for further policy easing, though some analysts still anticipate possible rate cuts in November 2025 and into 2026.

Fed Rate Cut Bets Weigh on the US Dollar

The US Dollar Index (DXY) trades around 97.80, struggling as markets ramp up expectations for a September rate cut.

• Futures indicate a 92% chance of a 25 bps cut, and about 12% odds of a larger 50 bps move, according to the CME FedWatch tool.
• US Producer Price Index (PPI) fell to 2.6% YoY in August, down from 3.3% in July, adding to the case for Fed easing.
• Meanwhile, labor market revisions showed nearly 1 million fewer jobs were created in the year through March 2025, reinforcing signs of a weakening US economy.

This softer data has fueled expectations that the Fed may not only cut rates in September but could ease policy further into year-end.

China’s CPI Adds Pressure on the Aussie

China’s Consumer Price Index (CPI) fell 0.4% YoY in August, weaker than the expected -0.2% and down from 0% in July. On a monthly basis, CPI came in flat, missing forecasts of a 0.1% rise.

Given China’s role as Australia’s largest trading partner, the weaker data poses a downside risk to the Aussie, despite current RBA support.

AUD/USD Technical Outlook

• Resistance: First hurdle is at 0.6635, the 10-month high recorded on September 10. A break above could pave the way toward 0.6687 (11-month high from Nov 2024).
• Support: Immediate support lies near the 9-day EMA at 0.6572, followed by 0.6560 (ascending channel lower boundary). A break lower could open the way toward the 50-day EMA at 0.6517 and August’s low at 0.6414.

For now, AUD/USD remains within an ascending channel, keeping the bullish bias intact unless support levels are broken.

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