Australian Dollar slips as US Dollar steadies post CPI

• AUD/USD holds firm near the 0.7070 area, building on its recent uptrend as the Greenback struggles to find fresh momentum.
• US CPI printed in line with forecasts.
• Attention turns to Thursday's PPI, where a sharp expected slowdown in core prices could reinforce the market's dovish read on the Fed.

AUD/USD is trading near the 0.7070 zone, holding onto a minority of Wednesday's gains after the pair touched a session high near 0.7090.

The US Consumer Price Index (CPI) came in largely as expected, with headline inflation rising 0.1% on the month and 3.4% YoY, matching forecasts, while the core annual rate eased to 2.5%, just below the 2.6% consensus. The read initially knocked the US Dollar (USD) lower and tempered rate-hike bets.

The next test comes Thursday, when the US Producer Price Index (PPI) is due. Core producer prices are expected to slow sharply on an annual basis, a reading that would add to the disinflation case already building after Wednesday's CPI.

Fed relief builds as July data supports policy hold

According to TD Securities, the July inflation report "should continue to bring relief to the Fed regarding the need for tighter policy, at least in the near horizon." The bank points to "signs of normalization in services prices along with tariff pass-through that remains under control," arguing that these dynamics "bode well for concerns around sticky core inflation." On that basis, TD Securities reiterates that "we remain of the view that the Fed will keep its policy stance unchanged this year."

In terms of market reaction, TD notes that "markets remain relatively unchanged in the wake of the July report, with the pricing for a hike in the September meeting still sitting just under 50%." While "the print is supportive of a Fed hold," the strategists caution that they are "still waiting on further data before the September meeting since the Fed has lowered the bar for a rate hike." They also flag that "the PPI report carries some risks to our 0.18% m/m preliminary PCE forecast," underscoring that upcoming releases could yet refine expectations around the near-term policy path.

Technical analysis

On the 4-hour chart, AUD/USD trades at 0.7067. The pair holds above both the 20-period Simple Moving Average (SMA) at 0.7062 and the 100-period SMA at 0.7016, suggesting a mildly constructive near-term tone while it presses into a tight band of overhead supply. The horizontal support at 0.7060 reinforces the immediate base, and the Relative Strength Index (RSI) around 57 hints at positive but not overstretched momentum as buyers test the upper end of the recent range.

On the topside, initial resistance is aligned at 0.7069, followed closely by clustered barriers at 0.7071 and 0.7078, where a sustained break would open the way for further gains. On the downside, immediate support is provided by the 20-period SMA at 0.7062, with the horizontal level at 0.7060 acting as a nearby floor. A deeper pullback would expose the more distant 100-period SMA support at 0.7016.

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