Australian Dollar stumbles as hot Australian CPI runs into a firmer US Dollar

• Australia's annual headline inflation eased to 3.5% but came in above the 3.2% forecast.
• US headline PCE inflation stayed at 3.7%, above the 3.6% consensus, giving the US Dollar Index a modest lift.
• Reports of an Oman-Iran deal concerning the Strait of Hormuz steadied risk sentiment.

AUD/USD is trading around 0.7170 on Wednesday, down slightly after a hot Australian inflation print ran straight into a firmer US Dollar.

Australia's monthly Consumer Price Index (CPI) climbed 1% in July, above the 0.8% forecast, lifting the annual rate to 3.5%. The trimmed mean measure of the Reserve Bank of Australia's (RBA) preferred core gauge rose 0.5% on the month and held at 3.6% YoY, above the 3.5% forecast.

The US Dollar found support of its own. Annual Personal Consumption Expenditure (PCE) inflation, the Federal Reserve's (Fed) preferred measure, held at 3.7%, above the 3.6% consensus, while the core PCE Price Index stayed at 3.3% as expected. Both rose 0.2% on the month.

Iran and Oman announced this week that they have completed their agreement over management of the Strait of Hormuz, but the US is not party to the agreement and has threatened Oman for making a separate deal that excludes it. A calmer Gulf would normally help risk-sensitive currencies like the Aussie.

Technical Analysis:

On the 4-hour chart, AUD/USD trades at 0.7171, holding a constructive bullish tone as it remains above both the 20-period Simple Moving Average (SMA) at 0.7164 and the longer-term 100-period SMA at 0.7090. The pair is testing a tight band of overhead supply just under recent highs, while the 14-period Relative Strength Index (RSI) around 60 stays in positive territory, hinting that upside momentum is still present but shy of overbought conditions.

On the topside, immediate resistance appears at the nearby horizontal barrier at 0.7175, followed by the recent cap around 0.7188. On the downside, initial support is clustered at 0.7168, reinforced by the 20-period SMA at 0.7164 and the horizontal level at 0.7160, before a deeper structural floor emerges at the 100-period SMA near 0.7090.

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