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This week, the Australian Consumer Price Index (CPI) y/y data was released at 6.8% (Forecast: 7.2% Previous: 7.4%) which signals a slowdown in inflation growth. In addition, the consecutive release of lower-than-expected CPI data highlights the possibility of a new trend of decreasing inflation for the Australian economy.
With the view that inflation has peaked and is possibly on a downturn, the Reserve Bank of Australia (RBA) could decide to pause further rate hikes at its upcoming cash rate decision on Tuesday next week. Keeping interest rates at 3.60% could lead to the AUDUSD trading slightly lower.
The AUDUSD is currently trading between the key resistance level of 0.6765 and the support level of 0.6565, with the formation of a bearish pennant. If the AUDUSD maintains below the resistance level, look for a potential breakout to the downside, to retest the key support level of 0.6565. This move lower could be driven by the recovery in strength on the DXY and if the RBA decides to hold interest rates at 3.60%.
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