Australia’s July CPI report delivered a considerable upside shock, printing at 2.8% yearly versus 2.0% anticipated. This scorching inflation studying quickly lowered RBA easing expectations and supplied help for the Australian greenback throughout every week dominated by Fed independence considerations and blended danger sentiment.
Let’s study which pairs from our watchlist capitalized on this surroundings of lowered RBA dovishness and broad USD weak spot to find out if our bullish AUD bias delivered worthwhile alternatives.
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The Setup
- What We Have been Watching: Australia’s Client Value Index (CPI) for July 2025
- The Expectation: Headline CPI to speed up from 1.9% y/y to 2.0% y/y
- Knowledge final result: CPI surged to 2.8% y/y, considerably beating expectations and marking the very best inflation charge in twelve months
- Market surroundings surrounding the occasion: Impartial danger sentiment; merchants remained cautious about Trump’s try to fireplace Fed Governor Lisa Prepare dinner whereas positioning forward of Nvidia’s earnings and the US core PCE report
Occasion End result
Australia delivered a considerable upside shock with July CPI leaping to 2.8% yearly, properly above the two.0% forecast and June’s 1.9% studying. The acceleration was primarily pushed by electrical energy worth actions linked to authorities vitality invoice aid timing, although underlying inflation measures additionally rose concerningly.
Key factors from the Australia CPI report:
- Headline inflation at 2.8% y/y, the very best since July 2024
- Electrical energy costs surged 13.1% yearly vs. 6.3% decline beforehand
- Core inflation measures jumped: CPI excluding risky objects reached 3.2% (up from 2.5%)
- Annual trimmed imply elevated to 2.7% (from 2.1%)
- Housing prices remained the biggest contributor at 3.6%
- Rental worth development moderated to three.9% yearly, the bottom since November 2022
ABS famous that, excluding authorities rebates, electrical energy costs would have risen 23.0% since June 2023. The short-term nature of the electricity-driven inflation initially tempered market reactions, although the broad-based acceleration in core measures stored RBA easing expectations in test.
Basic Bias Triggered: Bullish AUD setups
Markets navigated a posh surroundings in the course of the week, dominated by unprecedented Fed independence considerations following Trump’s try to fireplace Governor Lisa Prepare dinner. The political drama created vital uncertainty about central financial institution independence and potential politically pushed financial coverage selections.
The greenback exhibited persistent weak spot regardless of stronger-than-expected US GDP information displaying 3.3% development (vs 3.0% initially reported), as merchants more and more positioned for Fed charge cuts. The Chinese language yuan’s rise to its strongest degree since November 2024, with the PBOC setting stronger reference charges, added to USD weak spot by way of cross-currency flows.
Threat sentiment remained cautiously defensive all through the week. Geopolitical tensions stayed elevated with stalled Russia-Ukraine peace negotiations and escalating drone assaults. Gold superior steadily towards $3,415, supported by Fed charge minimize expectations and safe-haven demand. Oil rallied on provide considerations, whereas Bitcoin remained range-bound close to $111,500.
The watch for Nvidia’s earnings and Friday’s core PCE information stored many merchants on the sidelines, although broad USD weak spot from political uncertainty supplied underlying help for danger belongings. This created an surroundings the place lowered RBA easing expectations might shine by way of regardless of the general risk-off lean.
Friday noticed the greenback remained on observe for a month-to-month decline, as core PCE inflation met expectations at with a 0.3% m/m learn (as anticipated) and maintained 85% odds for September Fed charge cuts. Treasury yields exhibited blended habits with the 10-year rising marginally to 4.22% (however nonetheless down for the week), whereas gold futures moved larger to complete up the week up over 2.89%—as month-end positioning and continued safe-haven demand from ongoing Fed independence considerations offset the in-line inflation information.
AUD/USD: Web Bullish AUD Occasion final result + Threat-On Situation = Arguably the very best odds of a internet constructive final result
AUD/USD 1-hour Foreign exchange Chart by TradingView
The setup performed out exceptionally properly. AUD/USD initially spiked on the new CPI print, briefly testing the descending triangle resistance at 0.6500 earlier than pulling again as merchants digested the short-term nature of the electricity-driven inflation surge.
The pair discovered strong help on the pivot level (0.6480) degree as mentioned within the watchlist, and by the London session on CPI launch day, AUD/USD turned decisively larger, breaking above the focused resistance space recognized in our evaluation.
The mix of lowered RBA easing expectations and chronic USD weak spot created best situations for the bullish state of affairs. The pair prolonged features to succeed in the R1 goal at 0.6540.
What’s notably notable is how AUD outperformed most main currencies post-CPI occasion, signaling that Australian fundamentals carried observable weight regardless of broader risk-off headwinds from geopolitical tensions and pre-Nvidia warning. This resilience demonstrated that the inflation shock partially weathered exogenous drivers, validating the bullish thesis even in a difficult market surroundings.
Not Eligible to maneuver past Watchlist – Bearish AUD Setups and Lengthy AUD/CAD Setup
AUD/CAD: Web Bullish AUD Occasion End result + Threat-Off Situation
AUD/CAD 1-hour Foreign exchange Chart by TradingView
With the broad danger surroundings typically impartial across the time of launch, AUD/CAD didn’t make the minimize to maneuver past the Watchlist stage…but it surely was shut.
Nonetheless, this pair carried out reasonably properly with the bullish AU catalyst, although not as cleanly as AUD/USD. The ascending triangle sample held initially, with AUD/CAD discovering help close to the 0.8960 pivot level after the CPI launch as predicted.
The new Australian inflation information, mixed with present BOC charge minimize expectations, created a positive coverage divergence. Nonetheless, oil worth power (probably supporting CAD) and the obvious reversion to behaving as beta currencies as danger sentiment improved are the probably arguments for why AUD/CAD stayed in a good vary by way of the top of the the week.
GBP/AUD Brief: Web Bearish AUD Occasion final result + Threat-On Situation
GBP/AUD 1-hour Foreign exchange Chart by TradingView
The new CPI print invalidated this bearish AUD setup from the outset. Because of the stronger Australian inflation information mixed, with souring sentiment on the British pound on account of fiscal considerations, GBP/AUD prolonged its ongoing decline from 2.0850 in direction of the two.0600 main psychological deal with.
Whereas GBP/AUD was initially checked out as a bearish AUD setup on account of divergent financial coverage expectations, this pair turned out to be a strong pro-AUD play. The shift from comparatively much less dovish BOE expectations to structural considerations about UK debt ranges and “stinging curiosity funds” is one other good reminder that typically it pays to concentrate to those shifts in basic focus because the shifts in basic narrative typically lead to strong intraweek strikes.
AUD/CHF: Web Bearish AUD Occasion final result + Threat-Off Situation
AUD/CHF 1-hour Foreign exchange Chart by TradingView
Equally, this setup was invalidated from transferring past the Watchlist by the bullish AUD occasion final result. Regardless of periodic risk-off flows that are inclined to favor the Swiss franc, the Australian greenback’s basic power from lowered RBA easing expectations stored AUD/CHF supported above 0.5200 and the pivot level degree.
The pair finally pushed in direction of the R1 Pivot space and 0.5250 minor psychological degree, however pulled again on Friday with different danger belongings as market sentiment soured heading into the weekend.
The Verdict
The Australian CPI shock created elevated likelihood for essentially pushed bullish habits for the Australian greenback, with AUD/USD rising because the pair with the very best odds of potential success as broad danger sentiment shifted slowly from risk-off/impartial to impartial/risk-on, and broad greenback sentiment regarded shaky to as a result of battle between US President Trump and Fed Governor Prepare dinner.
AUD/USD behaved favorably for bulls publish occasion affirmation because the pair closed the week properly above the publish occasion worth. Varied commerce administration methods might have been employed (both a purchase after the pullback/maintain on the pivot space, or the purchase after sustained break above resistance) and nonetheless probably resulted in a internet constructive final result, which is why we rated the AUD/USD Watchlist dialogue as “extremely probably” of supporting a internet constructive final result.
Key Takeaways:
1. Flexibility in Commerce Administration Primarily based on Submit-Occasion Value Motion
The profitable AUD/USD commerce supplied a number of entry methods after the preliminary CPI launch: shopping for the pullback on the pivot degree (0.6480) or shopping for the sustained break above resistance. The evaluation emphasizes that “varied commerce administration methods might have been employed and nonetheless probably resulted in a internet constructive final result.” This flexibility, somewhat than inflexible entry guidelines, contributed to the setup’s success.
Utility: Put together a number of commerce administration eventualities for post-event worth motion. Don’t decide to only one entry methodology – be able to adapt your execution based mostly on how the market digests the information, whether or not by way of rapid breakouts or pullback alternatives at key technical ranges.
2. Constantly Reassess Basic Narratives All through the Week
The GBP/AUD instance completely illustrates why merchants should stay versatile and frequently reassess their basic assumptions. Initially categorized as a “bearish AUD setup on account of divergent financial coverage expectations,” this pair really turned a strong bullish AUD alternative as the elemental focus shifted in the course of the week. The evaluation notes that sentiment on the British pound soured on account of rising “structural considerations about UK debt ranges and ‘stinging curiosity funds,’” inflicting GBP/AUD to increase its decline towards the two.0600 psychological degree.
Utility: Don’t set your basic thesis in stone firstly of the week. Markets are dynamic, and new data or shifting focus areas can utterly change the risk-reward profile of your setups. Schedule common check-ins (every day or mid-week) to reassess whether or not the unique basic drivers are nonetheless legitimate or if new themes have emerged that would create higher alternatives in numerous devices. What begins as a bearish setup for one foreign money can rapidly grow to be a bullish setup if the opposing foreign money’s narrative deteriorates quicker than anticipated.
Disclaimer: The foreign exchange evaluation content material supplied in Babypips.com is meant solely for informational functions solely. The technical and basic eventualities mentioned are introduced to spotlight and educate on spot potential market alternatives that will warrant additional impartial analysis and due diligence. This content material exhibits how we cowl a portion of the complete buying and selling course of, and doesn’t represent that we ever give particular funding or buying and selling recommendation. The setups and analyses introduced on Babypips.com are very probably not appropriate for all portfolios or buying and selling kinds.
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