Australia’s July CPI report delivered a considerable upside shock, printing at 2.8% yearly versus 2.0% anticipated. This scorching inflation studying quickly diminished RBA easing expectations and supplied assist for the Australian greenback throughout every week dominated by Fed independence considerations and combined threat sentiment.
Let’s study which pairs from our watchlist capitalized on this setting of diminished RBA dovishness and broad USD weak point to find out if our bullish AUD bias delivered worthwhile alternatives.
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The Setup
- What We Have been Watching: Australia’s Shopper Value Index (CPI) for July 2025
- The Expectation: Headline CPI to speed up from 1.9% y/y to 2.0% y/y
- Knowledge end result: CPI surged to 2.8% y/y, considerably beating expectations and marking the best inflation charge in twelve months
- Market setting surrounding the occasion: Impartial threat 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 power 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 best since July 2024
- Electrical energy costs surged 13.1% yearly vs. 6.3% decline beforehand
- Core inflation measures jumped: CPI excluding unstable gadgets 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 saved RBA easing expectations in examine.
Elementary Bias Triggered: Bullish AUD setups
Markets navigated a posh setting through 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 choices.
The greenback exhibited persistent weak point 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 stage since November 2024, with the PBOC setting stronger reference charges, added to USD weak point via cross-currency flows.
Danger 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 lower expectations and safe-haven demand. Oil rallied on provide considerations, whereas Bitcoin remained range-bound close to $111,500.
The anticipate Nvidia’s earnings and Friday’s core PCE information saved many merchants on the sidelines, although broad USD weak point from political uncertainty supplied underlying assist for threat belongings. This created an setting the place diminished RBA easing expectations might shine via 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 combined conduct 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 end result + Danger-On State of affairs = Arguably one of the best odds of a internet optimistic end 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 stable assist on the pivot level (0.6480) stage 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 diminished RBA easing expectations and chronic USD weak point created splendid circumstances 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 setting.
Not Eligible to maneuver past Watchlist – Bearish AUD Setups and Lengthy AUD/CAD Setup
AUD/CAD: Web Bullish AUD Occasion End result + Danger-Off State of affairs
AUD/CAD 1-hour Foreign exchange Chart by TradingView
With the broad threat setting usually impartial across the time of launch, AUD/CAD didn’t make the lower to maneuver past the Watchlist stage…however it 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 assist close to the 0.8960 pivot level after the CPI launch as predicted.
The recent Australian inflation information, mixed with present BOC charge lower expectations, created a good coverage divergence. Nevertheless, oil worth energy (seemingly supporting CAD) and the obvious reversion to behaving as beta currencies as threat sentiment improved are the seemingly arguments for why AUD/CAD stayed in a decent vary via the top of the the week.
GBP/AUD Quick: Web Bearish AUD Occasion end result + Danger-On State of affairs
GBP/AUD 1-hour Foreign exchange Chart by TradingView
The recent CPI print invalidated this bearish AUD setup from the outset. Due to the stronger Australian inflation information mixed, with souring sentiment on the British pound resulting from fiscal considerations, GBP/AUD prolonged its ongoing decline from 2.0850 in the direction of the two.0600 main psychological deal with.
Whereas GBP/AUD was initially checked out as a bearish AUD setup resulting from divergent financial coverage expectations, this pair turned out to be a stable 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 generally it pays to concentrate to those shifts in elementary focus because the shifts in elementary narrative generally lead to stable intraweek strikes.
AUD/CHF: Web Bearish AUD Occasion end result + Danger-Off State of affairs
AUD/CHF 1-hour Foreign exchange Chart by TradingView
Equally, this setup was invalidated from transferring past the Watchlist by the bullish AUD occasion end result. Regardless of periodic risk-off flows that are likely to favor the Swiss franc, the Australian greenback’s elementary energy from diminished RBA easing expectations saved AUD/CHF supported above 0.5200 and the pivot level stage.
The pair finally pushed in the direction of the R1 Pivot space and 0.5250 minor psychological stage, however pulled again on Friday with different threat belongings as market sentiment soured heading into the weekend.
The Verdict
The Australian CPI shock created elevated chance for essentially pushed bullish conduct for the Australian greenback, with AUD/USD rising because the pair with the best odds of potential success as broad threat 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 put up occasion affirmation because the pair closed the week properly above the put up 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 seemingly resulted in a internet optimistic end result, which is why we rated the AUD/USD Watchlist dialogue as “extremely seemingly” of supporting a internet optimistic end result.
Key Takeaways:
1. Flexibility in Commerce Administration Based mostly on Publish-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 stage (0.6480) or shopping for the sustained break above resistance. The evaluation emphasizes that “numerous commerce administration methods might have been employed and nonetheless seemingly resulted in a internet optimistic end result.” This flexibility, moderately than inflexible entry guidelines, contributed to the setup’s success.
Software: Put together a number of commerce administration eventualities for post-event worth motion. Don’t decide to only one entry technique – be able to adapt your execution based mostly on how the market digests the information, whether or not via fast breakouts or pullback alternatives at key technical ranges.
2. Repeatedly Reassess Elementary Narratives All through the Week
The GBP/AUD instance completely illustrates why merchants should stay versatile and usually reassess their elementary assumptions. Initially categorized as a “bearish AUD setup resulting from divergent financial coverage expectations,” this pair really grew to become a stable bullish AUD alternative as the elemental focus shifted through the week. The evaluation notes that sentiment on the British pound soured resulting from rising “structural considerations about UK debt ranges and ‘stinging curiosity funds,’” inflicting GBP/AUD to increase its decline towards the two.0600 psychological stage.
Software: Don’t set your elementary thesis in stone at the start of the week. Markets are dynamic, and new info or shifting focus areas can fully change the risk-reward profile of your setups. Schedule common check-ins (every day or mid-week) to reassess whether or not the unique elementary drivers are nonetheless legitimate or if new themes have emerged that might create higher alternatives in several devices. What begins as a bearish setup for one foreign money can shortly turn into a bullish setup if the opposing foreign money’s narrative deteriorates sooner than anticipated.
Disclaimer: The foreign exchange evaluation content material supplied in Babypips.com is meant solely for informational functions solely. The technical and elementary eventualities mentioned are offered to spotlight and educate on the right way to spot potential market alternatives which will warrant additional impartial analysis and due diligence. This content material reveals 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 offered on Babypips.com are very seemingly not appropriate for all portfolios or buying and selling types.
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