Support Australian dollar strengthens as inflation exceeds forecasts
The Australian dollar strengthened as September inflation reached 4.3%, surpassing market forecasts. Driven by rising transport and housing costs, this surge heightened expectations of a Reserve Bank of Australia (RBA) interest rate hike, despite an elevated unemployment rate.
Australia's annual inflation rate accelerated to 4.3% in September, driven by rising fuel and transport costs.
Higher inflation has reinforced expectations of a more restrictive monetary policy stance from the RBA.
The Federal Reserve held benchmark interest rates steady at 4.0%, dampening greenback strength.
The RBA faces elevated inflation alongside a rising unemployment rate, which has reached 4.7%.
Date: 29 October 2026 (GMT+3)
Why is AUD/USD rising following stronger-than-expected Australian inflation data?
According to data released by the Australian Bureau of Statistics (ABS), the annual inflation rate accelerated from 4.0% in August to 4.3% in September, exceeding analysts' estimates of 4.2%. On a monthly basis, consumer prices increased by 0.8%, above the 0.7% forecast. This inflationary momentum was primarily driven by transport costs, which rose by 8.7% amid higher automotive fuel prices. Additionally, housing inflation remained a major contributor to overall price pressures.
Following the ABS release, the Australian dollar appreciated by 0.44% against the US dollar, with the AUD/USD pair closing at $0.7053. This market reaction can be attributed to growing expectations that the Reserve Bank of Australia (RBA) may adopt a more restrictive monetary policy stance. At 4.3%, headline inflation remains significantly above the RBA's 2%–3% target range, as ongoing geopolitical tensions in the Middle East continue to exert upward pressure on energy prices.
Conversely, ahead of the market close, the Federal Reserve held its benchmark interest rate steady at 4.0%. This softened greenback strength, reflecting a more neutral posture from the US central bank after maintaining a more restrictive tone in prior meetings.
Figure 1. Australian Bureau of Statistics (September 2026), Consumer Price Index, Australia, ABS Website, accessed 28 October 2026.
Notably, the RBA faces a complex macroeconomic backdrop, balancing persistent inflationary pressures against an unemployment rate that has exhibited an upward trajectory over the past three years. The jobless rate has reached 4.7%, its highest level since October 2021. Meanwhile, gross domestic product (GDP) growth has remained in positive territory, albeit indicating a modest average expansion of 0.4% over the last three years (quarterly change).
Technical analysis of the AUD/USD pair
From a technical perspective, the AUD/USD pair is trading inside a consolidation range pattern. Key technical observations include:
- Trend Context: The AUD/USD pair is oscillating within a consolidation range that has persisted year-to-date (YTD), reflecting market uncertainty regarding the prevailing trend.
- Momentum Indicators: Both the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) exhibit upward trajectories, indicating that short-term bullish momentum could persist—as they have not reached overbought levels. Nevertheless, the ongoing consolidation pattern reflects a degree of market indecision.
- Resistance Levels: Should the pair sustain its upward momentum, immediate resistance lies at 0.7130, followed by secondary resistance at 0.7171—a level that converges with the Volume Profile's Value Area High (VAH).
- Support Levels: In the event of a price retracement, key support levels are situated at 0.6988 and 0.6921. The latter technical floor coincides with the Volume Profile's Value Area Low (VAL), which has served as a prominent support zone in recent months.
Figure 2. AUD/USD Currency Pair (2025–2026). Source: Data from the Intercontinental Exchange (ICE); author's analysis conducted via TradingView.
