AUD/USD: Rally continues following unexpected CPI data – Societe Generale

AUD/USD Surges After Robust Australian CPI Data

According to Societe Generale, the AUD/USD currency pair has exited a prolonged period of sideways trading and is now approaching its highest level seen in 2023, driven by a stronger-than-anticipated core inflation reading in Australia. The analysis points out important support and resistance zones, identifies potential targets for further gains, and notes that market expectations now fully reflect a second 25 basis point rate hike by the Reserve Bank of Australia (RBA) to 4.10% in May.

RBA Rate Expectations Fuel AUD/USD Rally

• The spot rate has reclaimed the 0.71 level, marking its largest single-day advance since February 11, with a 0.74% jump following the higher-than-expected January CPI figures.
• Headline inflation in Australia remained steady at 3.8% for January, while the trimmed mean core CPI edged up to 3.4% from 3.3%, representing a 0.3% month-on-month increase.
• Markets are now fully pricing in a second RBA rate hike to 4.10% for May.

Technical Outlook and Key Levels

After breaking out of a lengthy consolidation phase, AUD/USD recently tested the 2023 high at 0.7150. The pair has since entered a short-term consolidation, with no immediate signs of a downward reversal. If a brief correction occurs, the February low at 0.6890 is expected to act as the first line of support.

This breakout from the previous broad trading range suggests the potential for additional upward movement. Should the pair move beyond 0.7150, the next technical targets are projected at 0.7220 and 0.7400.

Upcoming Events

Attention will also turn to remarks from Governor Bullock later today, as well as the release of capital expenditure data tonight.

(This content was generated with the assistance of artificial intelligence and subsequently reviewed by an editor.)