The Australian dollar faces a key volatility event with Australia’s CPI and the Federal Reserve decision due within 24 hours. AUD/USD is testing resistance near 0.72, while AUD/JPY and GBP/AUD sit at pivotal technical levels. Whether the Aussie breaks higher or slips back into range may come down to inflation data and the Fed’s tone.
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Australian Dollar Forecast: AUD/USD, AUD/JPY and GBP/AUD Set for CPI and FOMC
Australian CPI in Focus for AUD/USD Traders
There is a decent chance trimmed mean CPI ticks higher to 3.5% or above, marking a second consecutive quarter above the RBA’s 2–3% target band and reinforcing bets for three 25bp hikes this year. Cash rate futures currently imply 61bp of tightening—more than two 25bp hikes—and a 74% chance of the next move arriving in May. A slightly hotter print would effectively confirm a May hike, which already appears highly likely—and could give AUD/USD another lift within an already bullish trend.
LSEG, ABS (Australian Bureau of Statistics)
Trimmed Mean CPI Could Reinforce RBA Hike Expectations
There is a decent chance trimmed mean CPI will tick higher to 3.5% or above to mark the second consecutive quarter above the RBA’s 2-3% target band and bolster bets for three 25bp hikes this year. Cash rate futures currently imply 61bp of hikes – more than two 25bo hikes – and a 74% chance of the next one arriving in May. A slightly hotter print effectively confirms a May hike, though it seems quite likely already. And should given AUD/USD another bump in an already bullish trend.
Fed Decision Key to Whether AUD/USD Breaks Higher
The bigger question to me is whether we’ll see a breakout this week. My core bias is to eventually see AUD/USD head for 75c, but there is a risk we’ll also see the Aussie retreat back within last week’s range if the Fed deliver a hawkish hold. Which seems likely given the backdrop of the Middle East and rising inflationary pressures.
AUD/USD Technical Analysis: Australian Dollar vs US Dollar
The potential bull flag breakout on the AUD/USD daily chart, highlighted over the weekend, got to work immediately at Monday’s open. The rally from the March low has been strong into cycle highs, with momentum building within an already established uptrend from the April 2025 low—favouring a potential break above 0.72.
However, the Aussie risks handing back some of its CPI-driven gains if the Fed delivers the hawkish tone I anticipate. This could see AUD/USD test 0.72 in the near term before pulling back into its recent range—even if only temporarily.
That said, a less-hawkish Fed hold would likely pave the way for a sustained break above 0.72. In that scenario, the May 2022 high (0.7286) and the 0.7300 handle come into focus for AUD/USD bulls.
Source: ICE, TradingView
GBP/AUD Technical Analysis: British Pound vs Australian Dollar
The British pound has been within a clear downtrend against the Australian dollar for one year, sending GBP/AUD to a 15-month low in March. A two-week countertrend bounce failed to hold above the 200-week SMA and struggled to even retest the 200-week EMA before momentum reverted lower for the next three weeks. Prices are now teasing the lows of the 3-week decline ahead of today’s CPI print, as GBP/AUD prepares for its next leg lower.
A bearish engulfing candle formed on Monday to suggest a lower high formed just below 1.90. Bears could seek to fade into moves towards the May 2024 low (1.8825) within the March low (1.8696) initially in view – a break beneath which brings the May 2024 low into focus (1.8588).
Source: ICE, TradingView
AUD/JPY Technical Analysis: Australian Dollar vs Japanese Yen
The Australian dollar has been a clear outperformer against the Japanese yen since last April, with AUD/JPY trending higher in a relatively clean fashion. Momentum has turned higher once more from a tight consolidation around 114, and even the BOJ’s hawkish meeting failed to derail the move. Instead, AUD/JPY is now retesting its highs ahead of today’s inflation report.
However, the hammer candle on the daily chart warns that bullish momentum may be fading in the near term. So while AUD/JPY could initially push higher after CPI, there is a risk of a pullback back into its recent range—especially as the yen shows signs of strength elsewhere.
Despite the risk of near-term volatility, my core bias remains for AUD/JPY to head towards 115 and 116 while prices hold above 113.66. A break beneath this level would instead confirm a deeper retracement is underway, within what remains a broader bullish trend.
Source: ICE, TradingView
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-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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