Australia’s monthly inflation gauge, compiled jointly by the Melbourne Institute and TD Securities, surged by 0.9% in the latest reading — well above both the 0.2% consensus forecast and the prior 0.1% figure. This indicator, which tracks price changes in goods and services purchased by Australian households, is seen as a timelier measure than official CPI data, offering a more immediate pulse on inflationary pressures. The stronger print reinforces the case for the RBA to maintain its benchmark interest rate at 3.85%, countering earlier market expectations for a sooner rate cut.
Household spending data also painted a robust picture: June’s monthly growth eased from 1.0% to 0.5% but still outpaced the 0.3% forecast, while annual spending accelerated from 4.4% to 4.8%, beating the expected 3.9%. This suggests consumer confidence remains resilient and underpins the ongoing economic recovery.
On the geopolitical front, Health Minister Mark Butler expressed concern over U.S. President Donald Trump’s remarks about potentially raising import tariffs on pharmaceutical products to 250%. Such a move would place significant pressure on CSL Ltd., one of Australia’s largest biopharmaceutical exporters, with pharmaceuticals representing a key segment of Australian exports to the U.S. Last year, drug shipments to the American market totaled roughly A$2.1 billion, underscoring the sector’s strategic importance.
Across the Pacific, the U.S. dollar continues to lose ground following weaker-than-expected labor market data. Nonfarm payrolls for July rose by only 73K, well short of the 106K forecast, with the previous figure revised down sharply from 147K to just 14K. Unemployment ticked up from 4.1% to 4.2%, while initial jobless claims climbed to 226K from 219K, exceeding expectations of 221K. The four-week moving average dipped slightly to 220.73K, yet the total number of continuing claims rose to 1.974M, up from 1.936M and above preliminary estimates of 1.950M. These figures reinforce the view that the labor market is cooling, boosting market expectations for Fed rate cuts. According to CME FedWatch Tool, the probability of a 25-basis-point cut at the September 17 meeting has surged to 89.4%.
Technical Overview
The long-term trend remains bullish. After testing the 0.6420 support level late last month, AUD/USD reversed higher, breaking through resistance at 0.6500 and setting sights on 0.6587. A sustained move above that level would open the door toward 0.6700, a key psychological and technical target.
In the medium term, the pair has also retained an upward trajectory, despite a short-lived correction last week that took it down to the 0.6480–0.6383 support zone. A rebound has since carried the pair to 0.6528, with a break above July’s high at 0.6625 likely to pave the way toward the 0.6699–0.6677 resistance cluster.
Key Levels
- Resistance: 0.6587, 0.6700, 0.6810
- Support: 0.6420, 0.6370, 0.6200
Trading Scenarios
Bullish case: Consider long positions from 0.6500 targeting 0.6587, with a stop-loss at 0.6460. Timeframe: 9–12 days.
Bearish case: Short positions could be initiated below 0.6455, aiming for 0.6370, with a stop-loss at 0.6500.
Market Outlook
The convergence of robust domestic data, geopolitical risks, and a softening U.S. labor market creates a supportive environment for the Australian dollar. If the RBA stays on hold while the Fed moves toward easing, yield differentials could further favor the AUD, potentially pushing the pair toward multi-month highs.
AUD/USD targets 0.6587 resistance