Fundamental Analysis The AUD/USD pair is down 0.13% to 0.7210 during European trading hours on Tuesday. The AUD/USD pair faces selling pressure as the USD gains strength after initial weakness. The US Dollar Index (DXY), which tracks the value of the US dollar versus a basket of six foreign major currencies, is trading 0.1% higher at around 99.00. A bounce in the US Dollar, though the USD is expected to trade range-bound, as traders wait for the release of US Consumer Price Index (CPI) readings in August. Based on projections from TD Securities, the August CPI report is expected to show that "underlying inflation remained contained with core prices increasing by 0.19% m/m (2.3% y/y)." TD Securities expects the "services sector" to lead in gains while "core goods prices were a drag with a small m/m decrease." On the other hand, "headline CPI" is expected to increase "by a greater 0.37% m/m (3.4% y/y), reflecting higher energy costs and a slight increase in food inflation." The downside risks to TD Securities' forecast are "biased to the upside, owing to the assumption in the forecast of several large price decreases in goods categories vulnerable to tariffs, namely apparel and household goods. On the other hand, very few Fed board members seem satisfied with the latest inflation figures. However, we view August inflation data as a key driver of the FOMC's interest-rate decision at next month's policy meeting. "Finally, seeing some disinflation signs in the recent data," Fed Governor Christopher Waller said last week, adding, "If August inflation data surprises me on the high side, I will certainly look into hiking rates in September." For the Australian Dollar, the market is waiting for an interview with RBA Deputy Governor Andrew Hauser on the ABC later in the day. According to the strategists from the Commonwealth Bank of Australia, the Aussie could hold near 72 cents through the rest of the week.
Technical Analysis AUD/USD stands at 0.7210 on the daily chart, maintaining a strongly bullish technical setup after recovering from the July low at 0.6825. Price is above the Ichimoku cloud and well above its rising short-term and medium-term moving averages, confirming that bulls still have the upper hand in the overall technical picture. The current higher-highs and higher-lows configuration adds to the bullish technical setup, while prices are approaching a critical resistance zone. The first immediate resistance is at 0.7210, where price recently broke out. A break above this level would reinforce the bullish technical setup and shift focus to the next resistance at 0.7233, ahead of the May high zone at 0.7255. Momentum remains constructive but is increasingly overstretched. RSI at 65.36 indicates very strong positive momentum without exceeding the traditionally overbought 70-level mark. However, the Stochastic oscillator is already approaching the 90 level and signals that the current rally is entering the high-momentum territory. That said, the situation does not indicate a reversal, but it raises the likelihood of consolidation or a correction if buyers cannot overcome resistance. The Ichimoku picture looks especially constructive. Price is currently trading above the cloud, while the forward cloud still shows a bullish tilt and acts as a dynamic support zone. Rising moving averages also confirm the trend, with the first support level expected around 0.7165, followed by the 0.7130-0.7140 zone. Overall, AUD/USD is in a bullish trend; however, the pair is approaching a key technical resistance level, while momentum oscillators look overbought. Above 0.7165, buyers will still be in charge, while above 0.7210 and 0.7255 will confirm further upside potential.
