AUD Slides as Cooling Inflation and Risk-Off Hit Markets

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: May 28, 2026

Key Moments

AUD falls more than 0.5% toward 0.7100 during Thursday’s Asian session amid risk-off sentiment.
Softer-than-expected April CPI data reduces expectations for near-term RBA rate hikes, with June odds seen near zero and August odds cut to 40%.
AUD/USD trades below its 20-period EMA and hovers near a Head and Shoulders neckline around 0.7070, signaling a fragile technical outlook.

Market Overview

The Australian Dollar (AUD) weakens by more than 0.5% against the US Dollar, slipping toward 0.7100 during the Asian trading session on Thursday. The currency underperforms its major peers as global risk appetite deteriorates and expectations for further hawkish action from the Reserve Bank of Australia (RBA) fade.

Australian Dollar Performance Against Majors

The Australian Dollar’s intraday moves show broad softness, particularly versus the US Dollar. According to the overview of currency performance, the AUD is identified as the weakest against the USD today.

The referenced heat map illustrates percentage changes between major currencies. In this matrix, the currency listed in the left-hand column serves as the base, while the one in the top row functions as the quote. For instance, selecting the Australian Dollar from the left column and moving horizontally to the US Dollar cell displays the percentage move for AUD (base)/USD (quote).

Risk-Off Flows Support the US Dollar

Risk sentiment tilts in favor of safe-haven assets after Iran responds to United States (US) strikes near Bandar Abbas airport by hitting US military bases in the Gulf region. This shift in mood drives demand for the Greenback.

At press time, the US Dollar Index (DXY) – which tracks the US currency against six major counterparts – is up 0.3%, trading slightly above 99.50. Equity markets reflect the risk-averse tone, with S&P 500 futures and all major Asian stock indices in negative territory, signaling a notable erosion in investors’ appetite for risk.

Australian Inflation Data Undermines Hawkish RBA Expectations

Expectations for additional RBA tightening are pared back after April inflation data indicate more pronounced disinflation than anticipated. The Australian Consumer Price Index (CPI) for April shows price growth slowing faster than economists had projected.

On a month-on-month basis, CPI prints at 0.4%, below both the 0.6% consensus and the prior 1.1% reading. Year-over-year, CPI rises 4.2%, compared with expectations of 4.4% and down from 4.6% in March.

In the wake of the CPI release, market pricing implies virtually no chance of a policy move in June, while the probability of an August rate hike falls by more than half to 40%, according to Reuters.

AUD/USD Technical Picture

AUD/USD trades sharply lower around 0.7100 as of writing. The short-term technical stance is negative, with the pair holding beneath the 20-period exponential moving average (EMA), currently at 0.7158. A visible Head and Shoulders (H&S) pattern further supports a bearish interpretation for the pair.

The Relative Strength Index (RSI) hovers near 43, reflecting muted momentum without yet signaling oversold conditions. This suggests that selling pressure continues to dominate.

On the downside, a decisive break under the H&S neckline, located near 0.7070, could trigger a new leg lower. Key supports are seen at 0.7050 and at the April 13 trough around 0.6990. On the upside, the 20-day EMA at 0.7158 is the first major hurdle; a sustained move above this level would be needed to ease immediate downside pressure and potentially clear the path for a more extended rebound toward 0.7200.

(The technical analysis of this story was written with the help of an AI tool.)

Key Technical Levels for AUD/USD

Level	Type	Description
0.7200	Resistance	Upside objective if recovery extends beyond 20-day EMA
0.7158	Resistance	20-period / 20-day exponential moving average and first barrier for bulls
0.7100	Spot area	Current trading region during the Asian session
0.7070	Support	Approximate Head and Shoulders neckline; break may confirm new downside phase
0.7050	Support	Initial support zone below neckline
0.6990	Support	April 13 low and deeper downside target

Australian CPI (YoY) – Indicator Details

The Consumer Price Index (CPI), released monthly by the Australian Bureau of Statistics, tracks price changes for a broad basket of goods and services purchased by households. It serves as the main gauge of headline inflation following a methodological shift from quarterly to monthly reporting, applied from April 2024 onward. The year-on-year figure compares prices in the reference month with those in the same month a year earlier. Higher readings are typically interpreted as supportive for the Australian Dollar, while lower readings tend to be negative for the currency.