Australian Dollar breaches 0.69: Is hot US CPI making a 50-bp Fed hike more likely?

• A 0.88% slide takes AUD/USD below the psychological 0.6900 mark.
• Waller warns of a 50-basis-point hike as core CPI climbs 0.3% MoM.
• RBA tightening weighs on Australian consumer confidence, which drops 2.7% to 78.2.

Selling pressure leaves the Aussie Dollar down 0.88% against the US Dollar on Tuesday, with AUD/USD trading below 0.6900. Following hawkish comments from Governor Christopher Waller, a strong US inflation report has reinforced the case for a Federal Reserve (Fed) rate hike at its December meeting.

Can AUD/USD Find Support as Sticky US Inflation Strengthens Fed Hike Expectations?

Signs that disinflation has stalled emerged from the latest US Consumer Price Index (CPI) report. Headline CPI increased 0.4% MoM, easing from 0.6% but surpassing forecasts for a 0.3% decline. Excluding volatile components, core CPI generally provides a clearer picture of inflation. It advanced 0.3% MoM, matching September’s reading and exceeding the 0.2% forecast.

The figures backed up remarks from Fed Governor Christopher Waller, who had indicated a preference for a 50-basis-point rate increase if core CPI reached 0.3%. He argued that “hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”

Persistent inflation and a robust labour market mean there is “still work to do,” Fed Governor Michelle Bowman said recently. Earlier, Kansas City Fed President Jeffrey Schmid had expressed the view that the rate was not restrictive last year. Dallas Fed President Lorie Logan, meanwhile, wants “more rapid rate hikes possibly needed this winter.”

Against this backdrop, the CME FedWatch Tool shows that money markets fully price in a 25-basis-point increase in December. The probability of a larger, 50-basis-point hike stands at 10%.

Australian consumer sentiment, meanwhile, slipped to its lowest level in four years in November, following rate increases by the Reserve Bank of Australia (RBA) during the year. The main consumer sentiment 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 US markets shut for the Veterans Day holiday.

AUD/USD Price Forecast: Can Nearby Support Contain Further Losses?

A bearish short-term outlook persists on the daily chart, where AUD/USD is trading at 0.6870. Spot remains beneath both the latest triple simple moving average around 0.7034 and a broader descending trend line originating near 0.8015. The pair is holding just above a group of rising trend-line supports from 0.6865 and 0.6833. With the Relative Strength Index (14) near 37 signalling weak momentum, further declines remain a risk, while the overhead technical structure continues to limit recoveries.

Any recovery would first encounter resistance near the rising trend-line pivot around 0.6897, followed by the triple simple moving average at 0.7034. Further out, a horizontal barrier at 0.7198 and the long-term descending trend line near 0.8015 strengthen the broader resistance structure. For declines, the nearer ascending trend line at 0.6865 offers immediate support, ahead of another rising floor around 0.6833. A deeper structural base comes from the longer-term uptrend beginning at 0.6673, where buyers would be expected to take interest if the pullback extends.

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