Australian Dollar corrects against US Dollar, US CPI takes centre stage

The Australian Dollar (AUD) is down 0.13% to near 0.7210 against the US Dollar (USD) during the European trading session on Tuesday. The Aussie pair comes under pressure as the US Dollar turns positive after a weak start.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 99.00.

The US Dollar rebounds, but is expected to remain broadly sideways, with investors awaiting the United States (US) Consumer Price Index (CPI) data for August that will be published on Friday.

TD Securities sees core inflation contained even as headline CPI firms

According to TD Securities, the August CPI report is likely to show that “underlying inflation stayed under control,” with core prices “rising 0.19% m/m (2.3% y/y).” The bank expects the “services segment” to be the main driver of gains, while “core goods prices likely acted as a drag by posting a modest m/m drop.” In contrast, TD looks for “headline CPI” to post “a stronger 0.37% m/m (3.4% y/y) due to rising energy prices and a slight pickup in food inflation.” The bank also cautions that “risks to our forecasts” are “skewed to the upside,” noting that its projections assume “a number of large price declines in tariff-exposed goods categories, including apparel and household goods.”

Meanwhile, few Fed board members have signaled that the latest data on inflation has been encouraging, but also see August inflation data as a key driving factor for the Fed’s decision-making on interest rates at the policy meeting next month.

“Finally seeing some signs of disinflation in recent data," Fed Governor Christopher Waller said last week, and added, “If August inflation data comes in hot, he would consider a September rate hike."

On the Australian Dollar front, financial markets await Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser’s interview with the ABC during the day.

Strategists at the Commonwealth Bank of Australia say the Aussie could remain near 72 cents for most of this week, especially if Hunter sounds hawkish, Reuters reported.

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades at 0.7209, maintaining a bullish near-term bias as it holds above the 20-day Exponential Moving Average (EMA) at 0.7150. The pair’s steady advance from the mid-0.70s is underpinned by this rising dynamic support, while the 14-day Relative Strength Index around 66 suggests firm but not yet extreme bullish momentum.

On the downside, initial support is located at the 20-day EMA near 0.7150, where a break would hint at a deeper corrective phase toward prior mid-0.71 consolidation zones.