Australian Dollar strengthens after hot CPI report; eyes multi-month high ahead of US PCE

The Australian Dollar (AUD) has strengthened for two consecutive days, reaching a level near its highest since early June, as traders anticipate fresh momentum from the US Personal Consumption Expenditures (PCE) Price Index. The Australian Bureau of Statistics (ABS) reported a year-over-year (YoY) increase of 3.5% in the headline Consumer Price Index (CPI) for July, down from 3.8% the previous month.

This reading exceeded the 3.2% consensus estimate and had a modest positive impact on the Australian currency. The US Dollar (USD), however, is struggling to attract significant buyers due to dwindling expectations of an imminent rate hike by the US Federal Reserve (Fed), declining US bond yields, and hopes for a US-Iran peace deal.

Investors may wait for the release of the US PCE Price Index to gain more insight into the Fed's future policy direction before making new directional bets on the USD and the AUD/USD pair. The technical analysis supports the bullish outlook for AUD/USD, with the pair holding above the 100-period Simple Moving Average (SMA) on the 4-hour chart, indicating a constructive near-term bias.

Immediate support for the AUD/USD pair is located at the 100-period SMA near 0.7085, where buyers are expected to defend the upswing as long as the price remains above this level.