The AUD/USD currency pair traded 0.14% higher to near 0.7007 during the European session on Thursday, buoyed by a weaker US Dollar following the release of softer US Consumer Price Index (CPI) data for May [1]. The US Dollar Index (DXY), which measures the Greenback against six major currencies, was down 0.1% to around 99.97 at the time of reporting [1].
US headline CPI for May came in at 0.5% month-on-month, matching expectations but lower than the previous 0.6% reading. Core CPI growth, which excludes food and energy, slowed to 0.2% from 0.4% previously. On a year-on-year basis, headline and core CPI accelerated to 4.2% and 2.9%, respectively, both in line with expectations [1]. Despite the softer inflation data, the broader outlook for the US Dollar remains firm, with the CME FedWatch tool indicating a 71% probability of at least one Federal Reserve interest rate hike this year [1].
On the technical front, AUD/USD remains below the 20-day exponential moving average (EMA) at 0.7107 and faces resistance at the 50.0% Fibonacci retracement near 0.7057. The Relative Strength Index (RSI) is near 34, suggesting ongoing downside pressure but not yet at oversold levels. Immediate support is seen at the 61.8% Fibonacci retracement at 0.7005, with further downside targets at 0.6930 and 0.6836 if this level is breached [1].
Looking ahead, investors are focused on the Reserve Bank of Australia's (RBA) upcoming monetary policy announcement scheduled for Tuesday, where the consensus is that rates will remain unchanged [1]. The RBA's stance will be closely watched for signals on future policy direction, as a hawkish tone could support the Australian Dollar, while a dovish or neutral stance may weigh on it [1].
CONCLUSION
AUD/USD has found modest support following softer US inflation data, but technical indicators suggest continued downside risk. Market participants are now awaiting the RBA's policy decision and further signals from the Federal Reserve, both of which could influence the pair's direction in the near term.