The Australian Dollar (AUD) maintained a slight recovery against the US Dollar (USD), trading near 0.6972 after rebounding from the day's low of 0.6960 during early European trading on Wednesday. Despite this recovery, the AUD/USD pair remains 0.18% lower compared to Tuesday's closing price of 0.6985 [1]. The currency found support following the release of Australia's August Consumer Price Index (CPI) data, which showed year-on-year inflation rising to 4%, up from 3.5% in July and in line with market expectations. On a monthly basis, CPI growth cooled to 0.4%, matching estimates and down from the previous 1% reading [1].
The acceleration in annual inflation has heightened expectations for further interest rate hikes by the Reserve Bank of Australia (RBA) this year. RBA Governor Michele Bullock indicated that the possibility of additional rate hikes remains open. In 2026, the RBA has already raised its Official Cash Rate (OCR) four times, bringing it to 4.6%. MUFG noted that the RBA reiterated its commitment to taking necessary actions to return inflation to target, including further increases in the cash rate if needed [1].
From a technical perspective, AUD/USD is trading at 0.6977, remaining below the 20-day exponential moving average (EMA) at 0.7078, which signals a bearish near-term bias. The pair has dropped below the 61.8% Fibonacci retracement at 0.7008, with the Relative Strength Index (RSI) at 29 indicating oversold conditions that could slow further declines. Resistance levels are identified at 0.7008, 0.7052, and 0.7078, while support is seen at 0.6946 and 0.6866 [1].
Market participants are also awaiting the release of the US Personal Consumption Expenditure (PCE) Price Index data for August, scheduled for later in the day, which could further influence the AUD/USD pair [1].
CONCLUSION
The Australian Dollar's modest recovery is underpinned by stronger-than-expected inflation data, reinforcing expectations for further RBA rate hikes. However, technical indicators suggest the pair remains under bearish pressure, with key resistance and support levels in focus. Upcoming US inflation data may provide additional direction for the AUD/USD exchange rate.