The AUD/USD currency pair declined by 0.28% to trade near 0.6900 during the European session on Wednesday, marking its lowest level in over two months [1]. This downward movement is attributed to the US Dollar's strength, driven by firm expectations that the Federal Reserve will implement at least one interest rate hike before the end of the year. The US Dollar Index (DXY) was up 0.17% to approximately 101.57 at press time, reflecting the Greenback's outperformance against major currencies [1]. According to the CME FedWatch tool, there is an almost 86% probability of a Fed rate hike by year-end, with hawkish sentiment fueled by accelerating headline and core US Consumer Price Index (CPI) figures in recent months [1].
On the Australian side, the AUD underperformed following the release of mixed Consumer Price Index data for May. The headline CPI unexpectedly cooled to 4% year-on-year, down from 4.2% previously and below the consensus estimate of 4.4%. In contrast, the core CPI rose by 3.6% year-on-year, exceeding both the 3.5% estimate and the prior reading of 3.4% [1]. The CPI is a key indicator of inflation in Australia, and the latest figures reflect a divergence between headline and core inflation trends [1].
From a technical perspective, AUD/USD remains bearish in the near term, trading below the 10-day exponential moving average (EMA) at 0.6993. The Relative Strength Index (RSI) is at 27, indicating oversold conditions but also suggesting that downside pressure is strong, albeit stretched [1]. Initial resistance is seen at the 10-day EMA, and a daily close above this level would be required to ease the immediate bearish tone. On the downside, the pair could extend its decline toward the March 30 low at 0.6833 [1].
No analyst opinions or forward-looking statements beyond the technical and probability-based outlooks were provided in the article.
CONCLUSION
AUD/USD has come under renewed pressure due to strong US rate hike expectations and mixed Australian inflation data. The pair's technical setup points to further downside risk, with key support seen near 0.6833. Market sentiment remains bearish for the Aussie in the near term.