Australia CPI Slows, Rate Cut Bets Rise

Australian consumer prices rose at their slowest pace in over four years during the June quarter, reinforcing market expectations of a rate cut next month. According to data released on Wednesday by the Australian Bureau of Statistics, the Consumer Price Index (CPI) rose 0.7% quarter-on-quarter, below the forecasted 0.8%. On an annual basis, CPI inflation eased to 2.1%, down from 2.4% and again undershooting expectations.

Core inflation also showed further signs of softening. The trimmed mean CPI, a key measure watched by the Reserve Bank of Australia, rose just 0.6% for the quarter, under the projected 0.7%. The annual core rate slowed to 2.7% from 2.9%, moving deeper into the RBA's 2% – 3% target range and strengthening the case for monetary policy easing.

(AUD/USD Daily Chart, Source: Trading View)

From a technical analysis perspective, the AUD/USD currency pair was recently rejected from the resistance zone of 0.6585 – 0.6600, pushing the pair downward toward the order block of 0.6475 – 0.6490. If it finds support at this level, the pair may potentially resume its bullish movement and surge upward. Conversely, if it breaks below this zone with strong bearish momentum, it could drive the pair lower to retest the support zone of 0.6355 – 0.6370.

Fed Expected to Hold Rates Steady at 4.5%

The U.S. Federal Reserve's previous benchmark interest rate was held at 4.5%, and markets widely expect the upcoming decision at 0600 GMT today to maintain the same rate of 4.5%. This unchanged forecast reflects the Fed's cautious approach as it monitors the impact of past tightening on inflation and broader economic conditions. 

While inflation has cooled significantly from its peak, it remains somewhat above the 2% target. At the same time, economic indicators such as labour market strength and consumer spending have shown signs of softening. By keeping rates steady, the Fed allows more time to assess whether inflation is on a sustained path downward without triggering an unnecessary slowdown in growth. The neutral stance also offers flexibility in the event of future inflation surprises or economic shocks.

(U.S. Dollar Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the U.S. dollar index has been in a bearish trend since mid-January 2025, as reflected by the series of lower highs and lower lows. However, it began gaining bullish momentum and started moving higher in early July 2025. 

Two weeks ago, on 16 July, the index retested the swap zone of 98.40 – 98.70. Then, it pulled back; it formed a higher low rather than a lower low, indicating that the bearish momentum may be weakening. Since then, the index has surged upward again and is currently retesting the same swap zone. If it breaks above this level, it could potentially rise further to retest the resistance zone of 101.30 – 101.60.

Will BoC Pause Again at 2.75%?

The Bank of Canada's (BoC) previous benchmark interest rate stood at 2.75%, and market consensus anticipates it will remain unchanged at 2.75% in the upcoming decision at 1345 GMT today. This steady forecast reflects a cautious stance by policymakers as they balance lingering inflationary pressures with signs of economic moderation. 

While inflation has gradually eased from its peak, it remains above the BoC’s 2% target, prompting the central bank to maintain a restrictive policy to anchor expectations. At the same time, Canada’s economic growth and consumer spending have softened, discouraging further rate hikes. Holding the rate at 2.75% allows the BoC to assess how previous increases are filtering through the economy before making any further adjustments.

(USD/CAD Daily Chart, Source: Trading View)

From a technical analysis perspective, the USD/CAD currency pair has recently rebounded from the support zone of 1.3560 – 1.3590, surged upwards, and is now retesting the swap zone of 1.3745 – 1.3775. If the pair breaks above this swap zone with strong bullish momentum, it could trigger a market structure shift and potentially drive the price further upward. Conversely, if the pair faces rejection due to bearish pressure from this zone, it may drop back down to retest the support area.