Australian inflation moderates; AUD/USD declines but keeps bullish structure

Australia’s inflation rate slows, reducing pressure on the RBA as AUD declines The Australian dollar depreciated after headline inflation exhibited a significant deceleration, cooling faster than analysts had anticipated. According to data released by the Australian Bureau of Statistics (ABS), the headline year-on-year inflation rate slowed from 4.6% in March to 4.2% in April, undershooting market expectations of a decline to 4.4%. This was accompanied by a monthly consumer price index (CPI) increase of 0.4%, which fell short of the 0.6% forecast and marked a notable slowdown from the 1.1% surge recorded in March. An analysis by Trading Economics indicates that the most significant disinflationary progress occurred within goods inflation, which moderated from 5.5% in March to 4.7% in April. In turn, the most prominent decline was observed in transport costs, which dropped from 8.9% to 6.6% as automotive fuel prices eased following a fuel excise reduction implemented by the Australian government. However, while this deceleration represents an optimistic development for the domestic economy, headline inflation remains stuck above the RBA's target range of 2%–3%. Nonetheless, the cooling prices could offer the central bank a temporary reprieve from tightening pressures. Concurrently, the RBA faces conflicting domestic pressures as the unemployment rate has reached the 4.5% zone, marking its highest level since November 2021. Following the macroeconomic data releases, the Australian dollar fell by 0.43% against the US dollar to trade at $0.7135. The decline was fuelled by growing market expectations that the central bank could keep interest rates on hold, avoiding further restrictive monetary policy decisions. Figure 1. Australia Inflation Rate (2025–2026). Source: Data from the Australian Bureau of Statistics; Figure obtained from Trading Economics. Technical analysis of the AUD/USD pair From a technical perspective, the AUD/USD pair continues to trade within the structural boundaries of a bullish channel. Key observations include: Trend Context: The AUD/USD pair maintains a long-term bullish structure characterised by a classic sequence of higher highs and higher lows. Its position above the 50, 100, and 200-day SMAs reinforces this upward trajectory. Nevertheless, the MACD indicator signals a bearish divergence, suggesting that a short-term retracement or consolidation phase could occur. Resistance Levels: Should the pair stage a recovery and breach immediate resistance at $0.7175, the next major technical level resides at the structural resistance ceiling of $0.7270. A decisive daily close above this pivot point would suggest renewed bullish momentum targeting a higher valuation zone. Support Levels: If the short-term support at $0.7102 is broken to the downside, the next relevant demand zone is encountered at $0.7035. This represents a critical technical confluence where the 100-day SMA intersects with the ascending trendline floor. A decisive break below $0.7035 would significantly increase the probability of a deeper market correction. Momentum Indicators: The MACD indicator exhibits a bearish divergence, warning of a potential near-term pullback or sideways consolidation. Conversely, the RSI is trading flat within neutral territory, reflecting a lack of immediate directional conviction following the strength of the last market impulse. Figure 2. AUD/USD pair (2024–2026). Source: Data from the Intercontinental Exchange (ICE); own analysis conducted via TradingView.