Today, the Australian Bureau of Statistics released the Consumer Price Index (CPI) figures. According to ForexFactory, the actual annual inflation rate was 3.5% (expected = 3.4%, previous = 3.8%). In other words, inflation in Australia is declining, but not at the pace that might have been hoped for.

The initial reaction to the news was a sharp rise in the Australian dollar, with the AUD/USD rate increasing by approximately 0.4% in the first 15 minutes after the release.

However, the price then returned to levels seen before the inflation news was released. How can this be interpreted?

A technical analysis of the 4-hour AUD/USD chart shows that:

→ After the highly volatile 5 August, the price has been in an uptrend (as shown in blue). As a result of this rally, the price rose to the 0.680 level, where an important July peak was formed.

→ Following the inflation news, there was an attempt at a bullish breakout above this level, but it failed. Thus, the 0.680 level has confirmed its role as resistance.

→ The RSI indicator shows signs of bearish divergence, suggesting that the August rally may be fading.

The ascending blue channel remains relevant for now, but the 0.680 level appears to be a significant test of the bulls' intentions. The inability of the AUD/USD price to hold above the 0.680 level today may lead to a correction towards the lower boundary of the channel.

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