AUD/USD declines to approximately 0.7155 during the Asian session on Friday. Traders are increasing their positions on a potential rate hike in the US for September, driven by stronger-than-expected PPI data, which in turn bolsters the US Dollar. The RBA’s hawkish remarks have heightened anticipations for a rate increase in September. The AUD/USD pair experiences a slight decline, settling at approximately 0.7155 in the early hours of the Asian session on Friday. The US Dollar exhibits strength against the Australian Dollar in response to indications of rising inflation in the United States. The release of the US August Consumer Price Index inflation data will attract significant attention later on Friday. The US Producer Price Index, which serves as an indicator of wholesale prices and a reflection of pipeline cost pressures, increased by 5.4% year-over-year in August, compared to 4.8% previously, as reported by the Bureau of Labour Statistics on Thursday.
This figure exceeded the market consensus of 5.3%. In August, the headline PPI registered a monthly increase of 0.4%, aligning with market expectations. The core PPI increased by 0.2%, which is marginally below expectations. Following Thursday’s stronger Producer Price Index release, traders increased the probability of a quarter-percentage-point hike to over 73%, as indicated by the CME FedWatch tool. Traders are expected to derive additional insights from the forthcoming US CPI data later today. This report will serve as the final component of the inflation puzzle that the Federal Reserve (Fed) will consider prior to its interest rate decision next week. The headline CPI is anticipated to exhibit a rise of 3.4% in August, whereas the core CPI is forecasted to demonstrate an increase of 2.4% for the same timeframe. Nonetheless, a hawkish stance from the Reserve Bank of Australia could potentially mitigate the Australian dollar’s declines. RBA Assistant Governor Sarah Hunter indicated on Tuesday that the central bank might have to increase interest rates once more if inflation demonstrates greater persistence than anticipated, thereby maintaining the possibility of an additional hike at its September meeting.
Meanwhile, RBA Deputy Governor Andrew Hauser remarked that inflation is “one big problem” confronting Australia’s economy, emphasising that the central bank is prepared to increase interest rates further if deemed necessary. Markets are currently assigning a probability of approximately 72% to the likelihood that the RBA will increase the Official Cash Rate to 4.60% during the upcoming RBA Board meeting, as indicated by the RBA Rate Tracker. Rabobank points out that the RBA’s policy stance has turned more hawkish after “Hauser [gave] a hawkish speech, which has markets thinking of hikes this month and in November.” The bank adds that this prospective tightening path is “very much what the US Treasury would like to see – plus a lot more action on non-housing parts of the economy,” underscoring the alignment between Australian policy signals and US official preferences for firmer restraint beyond the housing sector.
In the daily chart, AUD/USD exhibits a slight bullish inclination as it operates above the 100-day Simple Moving Average, with the recent retracement remaining confined within the Bollinger Bands envelope. Price is currently positioned just below the Bollinger 20-period SMA, which serves as immediate resistance. Meanwhile, the Relative Strength Index (14) at 53.7 remains in neutral-to-positive territory, suggesting a consistent but not excessive upward momentum. On the topside, initial resistance is positioned at the Bollinger 20-period SMA near 0.7165, succeeded by a more formidable barrier at the upper boundary of the Bollinger Band around 0.7238. On the downside, the initial support level is the proximate price floor at 0.7158, followed by a more significant support area at the lower boundary of the Bollinger Band around 0.7092. The 100-day SMA at 0.7080 further strengthens this broader demand zone, suggesting that as long as prices remain above it, the positive sentiment is likely to continue.
