The Australian Dollar (AUD) saw gains following the release of May’s Consumer Price Index (CPI), which surpassed expectations, indicating persistent inflationary pressures. This development poses a hurdle to potential rate cuts by the Reserve Bank of Australia (RBA), thereby supporting the AUD/USD pair.
RBA Assistant Governor Christopher Kent underscored the importance of vigilance against inflationary risks, emphasizing current policies aimed at moderating demand growth and inflation. Kent’s remarks, reported by Bloomberg, suggest openness to future interest rate adjustments without ruling out any options.
Meanwhile, the US Dollar maintained stability after recent gains, with investors adopting a cautious stance ahead of upcoming key economic data releases. Thursday’s revised US Gross Domestic Product (GDP) for Q1 and Friday’s Personal Consumption Expenditure (PCE) Price Index are pivotal events influencing market sentiment.
In Australia, the monthly CPI for May reported a year-on-year increase of 4.0%, surpassing both April’s 3.6% and market expectations of 3.8%, according to data from the Australian Bureau of Statistics (ABS). This stronger-than-anticipated inflationary pressure contributed to the AUD’s upward momentum.
Looking ahead, technical analysis suggests the AUD/USD pair maintains a neutral stance around 0.6660, consolidating within a rectangle pattern on the daily chart. The 14-day Relative Strength Index (RSI) hovers slightly above the midpoint, indicating potential for a clearer directional trend.
Key support for the AUD/USD rests at the 50-day Exponential Moving Average (EMA) near 0.6616, with further downside targets around 0.6585 within the rectangle formation. Resistance levels are projected near 0.6695 and the psychological barrier of 0.6700, followed by recent highs around 0.6714 observed since January.
The market outlook remains influenced by ongoing inflation dynamics and central bank policies, particularly the RBA’s stance on potential rate adjustments in response to economic data trends and inflationary pressures.
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