Jakarta, GIC Trade – The Australian dollar weakened to around $0.675 after domestic inflation slowed more than expected in the second quarter, reducing pressure on the Reserve Bank of Australia to tighten policy further.
 
The Australian dollar (AUD) declined overall after the Australian Bureau of Statistics reported that the Consumer Price Index (CPI) rose 6% YoY in the second quarter of 2023, down from 7% recorded in the first quarter and below the market expectation of 6.2%.
 
This data reinforced the RBA's case for pausing future interest rate hikes and weighed on the domestic currency, which, combined with a modest rise in the US dollar (USD), prompted aggressive selling around the AUD/USD pair.
 
In fact, the US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, approached a two-week high reached on Tuesday, supported by optimistic US macro data that indicated a robust economy.
 
Earlier this month, the RBA decided to keep interest rates steady to assess the impact of previous economic hikes. However, the central bank warned that some further tightening may still be necessary to reduce persistent inflation, depending on incoming data.
 
Meanwhile, the Aussie also fell ahead of expected interest rate hikes from the US Federal Reserve and the European Central Bank this week.
 
Fundamentally, the slowdown in Australia’s inflation provides an impetus for the Reserve Bank of Australia to reconsider further interest rate policies, thereby weakening the Aussie dollar. Now, let’s look at the technical analysis:
 
Technical Analysis



The AUD/USD pair on the 1-hour timeframe is attempting to move higher, touching resistance at 0.67750 and heading towards the next resistance level at 0.67950. The upward trend is also indicated by the FXBot template, where the AUD figure is higher at 8.1 compared to the USD at 1.1. Meanwhile, the bullish bias is supported by buy signals indicated by a green arrow.
 
Today's Forex analysis is based on fundamental and technical perspectives used by the author and is not intended as advice or solicitation. For more information, click the image below.