• US CPI accelerated to 4.2% YoY in May, reinforcing expectations for a higher-for-longer Fed stance.
• Core CPI rose just 0.2% MoM, slightly below consensus.
• NAB expects the RBA’s next move to be a rate cut, adding pressure on the Australian Dollar.

The AUD/USD pair trades near 0.7020 on Wednesday, as the Australian Dollar (AUD) continues to lose value after the latest United States (US) inflation report was released mostly in line with expectations, reinforcing the view that the Federal Reserve (Fed) could keep interest rates elevated for longer.

The May Consumer Price Index (CPI) rose 0.5% MoM, matching forecasts but decelerating from the previous 0.6% pace. Annual headline inflation climbed to 4.2% YoY from 3.8%, meeting market expectations and highlighting persistent price pressure in the US economy.

Meanwhile, core CPI, which excludes food and energy, increased 0.2% MoM, below the expected 0.3% and down from 0.4% previously. Annual core CPI edged up to 2.9% from 2.8%. After the report, the US Dollar (USD) failed to find support.

On another note, the National Australia Bank (NAB) maintained that the Reserve Bank of Australia’s (RBA) next policy move is likely to be a rate cut, although the timing remains uncertain. NAB no longer expects another rate hike and believes the current cash rate could represent the peak of the tightening cycle, weighing on the AUD.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7019, maintaining a bearish near-term bias as it remains below both the 20-period Simple Moving Average (SMA) at 0.7045 and the 100-period SMA at 0.7127. The clustering of nearby resistance levels just overhead suggests rallies are likely to be sold into, while the Relative Strength Index (RSI) hovering around 35 hints at lingering downside pressure without yet signaling outright oversold conditions.

On the topside, initial resistance is aligned at 0.7027, followed by 0.7038 and the 20-period SMA at 0.7045, with the 100-period SMA further up at 0.7127 reinforcing the broader cap. On the downside, immediate support is located at 0.7018, ahead of a lower horizontal floor at 0.6998, where a break would open the door to a deeper extension of the current bearish phase.

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