Australian Dollar slides as US yields jump before pivotal CPI

The Australian Dollar ended Thursdays session with a 0.80% loss against the US Dollar after US producer inflation exceeded estimates, triggering pricing for a more hawkish Federal Reserve. The AUD/USD trades at 0.7159 after reaching a peak of 0.7223.

US August PPI data was 0.4% MoM as expected, driven by the jump in energy prices. Excluding volatile items, the so-called core undershoot estimates rose 0.2% MoM. The outlier was the annual PPI headline, overshooting forecasts of a 5.3% increase to 5.4%.

So far, money markets have priced in a 71% chance that the Federal Reserve might hike rates by 0.25%, according to the CME FedWatch Tool. US jobless claims, released at the same time, confirmed Fed Chair Warsh's statement that the labour market is “consistent with full employment,” and increased by 205K, modestly above forecasts but below the previous week's print of 206K.

US Treasury yields rose sharply, underpinning the Greenback, which, according to the US Dollar Index (DXY), ended Thursdays session near 99.09. The DXY, which tracks the performance of the buck against a basket of six currencies, finished the session with gains close to 0.30%.

Yields also soared in response to the escalation of the US – Iran conflict. Brent and WTI crude benchmarks rose above the $ 100-per-barrel barrier, up over 6%. Meanwhile, the Wall Street Journal reported that White House advisers told President Trump that the conflict could drag on for the rest of his term.

In Australia, Fridays economic schedule is empty. However, hawkish commentary by RBA officials increased traders' bets for 50 basis points towards the end of 2027, to 4.85%, which would be the highest level since 2008.

The PPI reading, alongside surging energy prices, increased the chances that the US Federal Reserve might raise interest rates by 25 basis points at next weeks meeting. Money markets see a nearly 70% chance for an increase, via the CME FedWatch Tool

Traders are focusing on Friday‘s CPI report. Analysts expect August’s CPI to rise from 0.1% to 0.4% MoM, while the annual rate remains steady at 3.4%. Core CPI is forecasted to stay at 0.2% MoM and slightly decrease from 2.5% to 2.4% YoY.

In the daily chart, AUD/USD trades at 0.7161, maintaining a constructive bullish bias as it holds well above the clustered 50/100/200-day simple moving averages (SMAs) around 0.7062 and continues to respect a series of rising trend-line supports from the mid-0.68/0.69 region. The Relative Strength Index (14) has eased back toward the mid-50s, hinting at consolidative rather than exhausted momentum while the pair grinds higher toward nearby overhead barriers.

On the topside, immediate resistance is seen at the horizontal cap around 0.7198, where a clear break would open the door for further gains toward higher daily highs. On the downside, initial demand is expected near the 0.7161 area along the latest sequence of rising trend-line supports, with the next more substantial support coming in at the clustered SMAs around 0.7062, where a break lower would weaken the current bullish structure.

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

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the strongest against the New Zealand Dollar.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).