Australian Dollar stays pressured amid cooling Australian inflation

• AUD/USD trades near a three-month low as the Aussie remains under pressure following the latest inflation data.
• Australia’s annual CPI eased to 4.0% in May, below the expected 4.4% and down from 4.2% in April.
• Markets now await Australian employment data and Thursday’s US PCE report.

The AUD/USD pair remained under pressure, trading at 0.6890 near a three-month low on Wednesday as investors assessed Australia’s latest inflation figures and now focus on the upcoming United States (US) Personal Consumption Expenditures Price Index (PCE), the Federal Reserve’s preferred inflation gauge.

The pair is presently down 0.4% in the American session after losing about 1.2% on Tuesday.

Australia’s annual inflation eased to 4.0% in May, lower than the expected 4.4% and down from 4.2% in April, as lower fuel prices helped cool the headline reading. However, the underlying picture remained less comfortable for the Reserve Bank of Australia (RBA), with Trimmed-mean Inflation rising to 3.6% from 3.4%, suggesting that domestic price pressure remains sticky.

Investors will monitor Australia’s upcoming Employment Change and Unemployment Rate as well as other employment reports due on Thursday, which could provide fresh clues on the strength of the labor market and the RBA’s next policy steps.

On the US side, attention now turns to the US PCE report due on Thursday. The previous release showed the headline PCE price index rising 3.8% YoY in April, while core PCE stood at 3.3%, keeping inflation above the Fed’s comfort zone.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6887, extending a bearish near-term bias as price holds below both the 20-period Simple Moving Average (SMA) at 0.6962 and the 100-period SMA at 0.7048. The pair is pressing against a nearby floor, with the Relative Strength Index (RSI) sinking into deeply oversold territory near 16, hinting at stretched downside momentum but yet to trigger a meaningful rebound.

On the topside, initial resistance is aligned at 0.6892, followed by 0.6902 and 0.6919, with the 20-period SMA at 0.6962 and the 100-period SMA at 0.7048 reinforcing a broader supply zone overhead. On the downside, immediate support comes from the recently tested 0.6885 level; a decisive break lower would expose further weakness, while holding above this pivot could allow for a corrective bounce within the prevailing downtrend.

(The technical analysis of this story was written with the help of an AI tool.)