Australia launched stronger-than-expected inflation information, because the headline annual CPI studying jumped to three.2% and surpassed its central financial institution’s 2-3% goal vary.

How did the Australian greenback react, and which amongst our watchlist setups yielded the very best buying and selling alternative?

Watchlists are worth outlook & technique discussions supported by each elementary & technical evaluation, an important step in the direction of making a prime quality discretionary commerce thought earlier than engaged on a threat & commerce administration plan.

Should you’d wish to observe our “Watchlist” picks proper when they’re revealed all through the week, try our BabyPips Premium subscribe web page to be taught extra!

We’re breaking down our AUD setups this week and the way every pair carried out after hotter-than-expected Australian CPI information whereas markets remained principally targeted on commerce headlines.

The Setup

What We Have been Watching: Australian Shopper Worth Index (Q3 2025)

• Expectation: Headline CPI to rise from 0.7% to 1.0% q/q or from 2.1% to 2.9% y/y within the September quarter
• Knowledge end result: Headline CPI surged to 1.3% q/q or 3.2% y/y, above the RBA’s 2-3% goal vary
• Market atmosphere surrounding the occasion: Combined sentiment and threat correlations, as asset courses have been pushed by commerce optimism forward of the Trump-Xi assembly, U.S. tech sector rally, central financial institution positioning, and resurfacing geopolitical tensions in Israel

Occasion Final result

Australia’s CPI rose 3.2% year-over-year within the third quarter of 2025, marking the very best inflation charge in over a 12 months and touchdown above the Reserve Financial institution of Australia’s goal band for the primary time since Q2 2024.

Key Takeaways:

• Headline CPI elevated 3.2% yearly in Q3 2025, considerably above the three.0% consensus forecast and accelerating from 2.1% in Q2
• Quarterly inflation rose 1.3%, pushed primarily by housing (+2.5%), recreation and tradition (+1.9%), and transport (+1.2%)
• Trimmed imply inflation climbed to three.0% yearly, up from 2.7% in Q2 – the primary improve since December 2022

Probably the most important worth rises in Q3 have been concentrated in housing, recreation and tradition, and transport sectors. Property charges and costs additionally recorded their largest quarterly rise since 2014, growing 6.3% as native councils applied charge evaluations.

Elementary Bias Triggered: Bullish AUD setups

Broad Market and Exogenous Drivers:

Commerce Optimism and Danger-On Rally (Monday-Tuesday): Markets surged as weekend developments revealed a U.S.-China diplomatic framework forward of Thursday’s Trump-Xi summit. The prospect of commerce de-escalation sparked a broad risk-on rally, sending equities to contemporary highs whereas gold dipped beneath $4,000. The continuing U.S. authorities shutdown continued depriving markets of essential financial information.

Central Financial institution Volatility and Powell’s Hawkish Pivot (Wednesday): The Fed delivered an anticipated 25 foundation level minimize, however Chair Powell shocked markets by stating December cuts weren’t a “foregone conclusion.” This triggered a pointy greenback rally and despatched 10-year yields spiking to 4.10%. The Financial institution of Canada additionally minimize charges however signaled its easing cycle could also be over, whereas Australia’s sizzling CPI all however dominated out a November RBA minimize.

Commerce Truce and Central Financial institution Surprises (Thursday-Friday): U.S. President Trump boasted that the assembly with Chinese language President Xi was “unimaginable” and boasted of the tariffs truce that briefly de-escalated commerce tensions. Volatility remained elevated within the foreign exchange scene, because the BOJ downplayed its hawkish tilt and cited the necessity to look forward to extra information earlier than tightening. In the meantime, the ECB additionally stored charges unchanged however paid additional shut consideration to exterior dangers from commerce and geopolitics that might alter its coverage path.

AUD/NZD: Bullish Occasion Final result + Danger-Off State of affairs

= Arguably good odds of a internet optimistic end result

AUD/NZD 1-Hour Foreign exchange Chart by TradingView

This setup targeted on a protracted bias and certain delivered exceptionally nicely all through the week. After the unique dialogue, AUD/NZD broke above its October development line resistance forward of the CPI launch and was hovering close to the 1.1400 psychological degree and R2 Pivot Level at 1.1394 when the Australian inflation information hit the wires.

The warmer-than-expected CPI print sparked an instantaneous validation of elementary Aussie lengthy bias, confirmed by AUD/NZD’s transfer to interrupt above R2 instantly. After a fast consolidation & pullback, the pair retested the R2 Pivot Level resistance-turned-support earlier than climbing to new weekly highs as the elemental sentiment favored Aussie over the Kiwi.

The bullish transfer earlier than the top of the week was probably fueled by a transparent elementary hole between the 2 currencies. Australia’s inflation shock stored the RBA leaning cautious on charge cuts, whereas New Zealand’s weak information, together with the ANZ Roy Morgan confidence drop to 92.4, added some strain on Kiwi.  Even with Powell’s hawkish FOMC tone shaking threat sentiment midweek, the pair held agency at key assist earlier than pushing greater once more.

Due to the pullback, some commerce administration elements a person would have made would have probably influenced the diploma of a commerce end result, however as a result of AUD/NZD closed the week above the dialogue worth space and publish occasion worth space, this dialogue would extremely probably have generated a internet optimistic end result for many commerce methods.

Not Eligible to maneuver past Watchlist – Bearish AUD Setups and AUD/USD

AUD/USD: Bullish AUD Occasion Final result + Danger-On State of affairs

AUD/USD 1-Hour Foreign exchange Chart by TradingView

AUD/USD began the week sturdy, breaking above the .6525 triangle resistance forward of the CPI launch. The warmer inflation print sparked a fast rally, with the Aussie gaining broadly, particularly towards GBP and NZD.

However Powell’s hawkish FOMC tone midweek flipped USD sentiment mid-week, pushing the greenback greater, which in our opinion, successfully weakened our conviction or invalidated being lengthy biased on AUD/USD.

That FOMC occasion promptly had AUD/USD Foreign exchange merchants again in promote mode, forcing the pair to offer again a lot of its post-CPI pop. For anybody who ignored USD elementary developments and tried to lengthy AUD/USD probably noticed a really detrimental end result by the top of the week, it doesn’t matter what buying and selling model / technique could have been deployed.

AUD/CAD: Bearish Occasion Final result + Danger-On Setting

AUD/CAD 1-Hour Foreign exchange Chart by TradingView

The result of the goal occasion didn’t favor bearish AUD setups, as Australia’s CPI surged above expectations and the RBA’s goal vary. The result plus the bullish sentiment within the pair earlier than the occasion invalidated the AUD/CAD dialogue, making it unsuitable to maneuver past the watchlist section.

Put up Australian CPI occasion, the Loonie truly benefited from a rebound in crude oil costs spurred by resurfacing Russian geopolitical tensions and U.S. sanctions. Mixed with considerably much less dovish commentary from the BOC mid-week, that is probably why AUD/CAD pulled again decrease and the pair fell right into a consolidation sample, as bulls from each side butted heads within the pair for the remainder of the week.

EUR/AUD: Bearish Occasion Final result + Danger-Off Setting

EUR/AUD 1-Hour Foreign exchange Chart by TradingView

This setup assumed weaker Australian inflation would set off AUD promoting, positioning EUR/AUD for a bounce from the center of its long-term vary. The warmer-than-expected CPI invalidated this thesis from the outset.

Whereas risk-off flows did periodically assist safe-haven currencies like EUR throughout mid-week volatility following Powell’s hawkish tone, the elemental case for AUD power overwhelmed these momentary shifts. EUR/AUD remained beneath strain all through the week because the inflation shock strengthened expectations for continued RBA warning on potential charge cuts, and because the euro noticed a little bit of weak spot because the U.S. greenback discovered power within the latter half of the week.

The Verdict

Australia’s upside inflation shock strongly supported bullish AUD alternatives, with AUD/NZD transferring past the Watchlist section as a viable candidate for reside threat publicity. The warmer-than-expected CPI studying—which pushed headline inflation to three.2% y/y and above the RBA’s goal vary—strengthened the case for prolonged coverage warning from the central financial institution.

The AUD/NZD lengthy bias emerged as a probable winner as nicely.  The pair’s upside was confirmed instantly following the CPI launch, and presumably drew in elementary bulls, particularly after the retest of the damaged Pivot resistance ranges. The basic divergence between sticky Australian inflation and softer New Zealand information assist a compelling elementary narrative that proved resilient even when broader threat sentiment shifted mid-week.

General we charge our watchlist discussions as “extremely probably” supportive of a optimistic end result because the bullish AUD bias mixed with a posh but barely risk-off market atmosphere surrounding the goal occasion enabled AUD/NZD to capitalize on the stronger than anticipated CPI outcomes.

Key Takeaways:

Elementary Divergence Beats Danger Sentiment

Whilst threat urge for food shifted midweek after Powell’s hawkish tone, AUD/NZD stored rallying because of Australia’s sticky inflation and New Zealand’s weak information. Robust fundamentals outweighed shifting market temper.

Utility: When buying and selling event-driven crosses, give attention to elementary divergence. Strong macro tales endure; sentiment-driven pairs usually don’t.

Handle Timing Round Main Occasions

The CPI launch landed proper earlier than central financial institution conferences/statements and essential commerce occasions, making a catalyst-packed week that demanded tighter threat management.

Utility: When a number of occasions crowd the calendar, plan exits and threat trims early. Lively administration between catalysts can imply the distinction between revenue and drawdown.

Technical and Elementary Alignment Boosts Conviction

AUD/NZD had already damaged its development line earlier than the CPI launch, and the inflation beat confirmed the setup.

Utility: Favor setups the place technicals and fundamentals align. When worth motion helps your bias forward of an occasion, momentum often lasts longer and risk-reward improves.