Australian Dollar breaches 0.69 as risk of 50-bp Fed hike mounts after strong US CPI

• A 0.88% slide takes AUD/USD beneath the psychological 0.6900 threshold.
• A 0.3% MoM increase in core CPI prompts Waller's warning of a 50-basis-point rate rise.
• With the RBA tightening policy, Australian consumer confidence drops 2.7% to 78.2.

A hot US inflation report has reinforced the case for a Federal Reserve (Fed) rate rise at its December meeting, following hawkish comments from Governor Christopher Waller. Against this backdrop, the Australian Dollar is down 0.88% against the US Dollar on Tuesday, with AUD/USD trading beneath 0.6900.

AUD/USD slides as stubborn US inflation strengthens expectations of Fed rate rises

A 0.4% MoM increase in the US Consumer Price Index (CPI) marked a slowdown from 0.6%, but exceeded forecasts for a 0.3% fall. Excluding volatile items, core CPI advanced 0.3% MoM, matching September’s reading and surpassing the 0.2% forecast. This measure typically gives a clearer picture of inflation, and the figures suggest that disinflation has stalled.

The figures bore out remarks from Fed Governor Christopher Waller: a core CPI reading of 0.3%, he said, would lead him to favour a 50-basis-point rate increase, as “hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”

Persistent inflation and a resilient labour market indicate there is “still work to do.” That was the recent assessment of Fed Governor Michelle Bowman. Earlier, Kansas City Fed President Jeffrey Schmid had said he did not consider last year's rate restrictive, while Dallas Fed President Lorie Logan wants “more rapid rate hikes possibly needed this winter.”

According to the CME FedWatch Tool, money markets now fully discount a 25-basis-point increase in December. Against this backdrop, the probability assigned to a 50-basis-point rise stands at 10%.

November's Australian consumer sentiment figures reached a four-year low, following rate increases by the Reserve Bank of Australia (RBA) during the year. The headline index in the Westpac-Melbourne Institute survey declined 2.7% to 78.2 in November.

Looking ahead, neither Australia nor the US has any economic releases scheduled, with markets closed for the Veterans Day holiday.

AUD/USD Price Forecast: Bears retain the near-term advantage

Trading at 0.6870 on the daily chart, AUD/USD retains a bearish near-term outlook. Spot sits beneath both the latest triple simple moving average around 0.7034 and a broader falling trend line that originates near 0.8015. The pair is holding just above a group of rising trend-line supports from 0.6865 and 0.6833. Meanwhile, a Relative Strength Index (14) reading around 37 points to subdued momentum, leaving scope for further losses as the overhead technical structure continues to limit recoveries.

The rising trend-line pivot around 0.6897 offers the first resistance, followed by the triple simple moving average at 0.7034. Further out, a horizontal barrier at 0.7198 and the long-term falling trend line near 0.8015 add to the broader resistance structure. Initial support lies at the closer ascending trend line at 0.6865, ahead of another rising floor around 0.6833. Below these, the longer-term uptrend beginning at 0.6673 provides a deeper structural base, where a more pronounced pullback would be expected to attract buyers.

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