Support test at $0.6895: Can AUD/USD avoid deeper losses?

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Australian dollar drops 0.63% to $0.693

Highlights

Soft Q2 Australian CPI figures have lowered immediate rate hike expectations, pushing AUD/USD under pressure.
RBA adopts a more flexible policy stance as slowing domestic demand and housing ease inflation concerns.
AUD/USD maintains bearish momentum with a 67% chance of downside toward $0.6895–$0.6965, resistance near $0.6961.

Cautious rate hike outlook as CPI miss tempers bullish sentiment

The Australian Dollar has come under pressure against the US Dollar in the wake of softer-than-expected second-quarter CPI figures, prompting a reassessment of the immediate inflation outlook and reducing near-term expectations for further rate hikes by the Reserve Bank of Australia, according to Fxstreet. Governor Michele Bullock acknowledged that while inflation remains a concern, a slowdown in domestic economic activity and housing demand has allowed the central bank to adopt a more flexible approach toward future policy moves. As a result, the market is weighing the possibility of a rate increase at the August meeting, but overall sentiment has shifted toward a more cautious stance on the prospects for additional tightening.

Bearish signals and mixed momentum as resistance caps recovery attempts

On the hourly chart, AUD/USD remains below the MA-20 at $0.6956 and MA-50 at $0.6972, with the longer-term MA-200 at $0.6999 acting as an upper boundary. The Ichimoku Kijun line is set at $0.6961, establishing immediate resistance for any attempted recovery. Downside support is found at $0.6895, which marks the lower end of the expected trading range. Technical indicators signal mixed but predominantly negative momentum: MACD and ADX both point to a bearish setup, and oscillators including RSI at 36.28, CCI (Sell), and Bull/Bear Power (Sell) reinforce seller control, while Stoch RSI indicates the possibility of a short-term buy signal and the Awesome Oscillator remains neutral. This divergence among oscillators suggests intraday momentum could remain choppy.

Consolidation likely as downside risk outweighs bullish scenario

In the short term, AUD/USD is expected to trade within a volatility band of $0.6895 to $0.6965 over the next two to three sessions. The baseline scenario calls for price consolidation within this range. Upside breaks above $0.6961 would signal a potential recovery toward the top end of the band, while a slide below $0.6895 would likely reinforce recent negative momentum and widen the downside. The probability for further upside is estimated at 33%, while the likelihood of further declines is higher at 67%.

Viktoras Karapetjanc, expert at Traders Union, observes that the weaker Q2 CPI print has shifted sentiment toward a more cautious outlook for the Australian Dollar. He notes that the Reserve Bank of Australia is signaling flexibility, reducing the urgency for immediate policy tightening. Karapetjanc believes the pair will likely consolidate within the identified range as the market digests recent data and policy signals. Risk remains tilted to the downside, but a recovery is possible if resistance is cleared. "While short-term headwinds persist, I see room for a recovery if AUD/USD can sustain above $0.6961 — the outlook is not outright negative."

Earlier, analysts noted that AUD/USD was under sustained selling pressure, with bearish momentum dominating across multiple timeframes. The latest shift in market sentiment, driven by softer inflation data and a more cautious Reserve Bank of Australia, heightens the risk of a move below the key $0.6895 support, signaling further downside vulnerability in the sessions ahead.

Source of Data: AUD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.