For the third consecutive day, the Australian dollar has been attempting to reclaim the 0.66 area against the US dollar. The most successful attempt came after the release of Australia's monthly CPI data, which came in "in the green," signaling a pickup in inflation.

AUD/USD traders reacted emotionally to this release—partly because the Reserve Bank of Australia's September meeting is less than a week away, on the 30th (next Tuesday). The data have essentially sealed the fate of the September meeting: there should now be no doubt that the RBA will keep all policy parameters unchanged. However, most analysts were already confident, even before Wednesday's "confirmation," that the RBA would remain on hold in September. Further policy decisions will depend on the dynamics of key macroeconomic indicators.

Back to the CPI report: The monthly CPI has a limited direct impact on the RBA (quarterly inflation data is prioritized), but in the short term, the release sparked significant volatility. For two months (May and June), the monthly CPI fell, hitting 1.9%. Then CPI reversed and began accelerating: in July, it rose to 2.8%, and in August, to 3.0%, exceeding most analysts' more modest forecasts of 2.9%. August saw the fastest monthly CPI growth since July 2024.

But don't rush to go long AUD/USD in response to these seemingly impressive numbers. Temporary factors mainly drove August's inflation surge. The key sources of CPI growth were unstable and short-term in nature. For example, electricity costs jumped 24.6% year-over-year—mainly due to the cancellation of subsidies in Queensland, Tasmania, and Western Australia. This also impacted the "housing and utilities" category, with housing inflation accelerating in August to 4.5% from 3.6%. As "housing" is one of the heaviest-weighted categories in the CPI, even localized tariff hikes in a few states could cause the entire index to rise. Still, this is more "noise" than real inflation, as it's driven by subsidy removal, not overall economic overheating—in other words, a temporary factor.

A significant contribution to August's CPI also came from food, non-alcoholic beverages, alcohol, and tobacco. However, price increases in these categories are volatile and don't reflect structural inflationary pressure. For instance, prices for fruits, vegetables, and dairy products are heavily influenced by weather, logistics/fuel/harvest costs, and can fluctuate month to month without forming a discernible inflation trend.

All this suggests the RBA is unlikely to dramatize the August monthly inflation spike. Much more important will be the quarterly data coming in October, after the September meeting. Of course, consecutive monthly inflation growth can impact the quarterly CPI, but the RBA mainly assesses inflation persistence—so not just the jump, but its structure and causes matter, especially if trimmed mean inflation remains stable.

Thus, even though August's monthly CPI reached an almost yearly high, longs on AUD/USD remain risky, as the rise was due to non-recurring factors rather than genuine overheating. Also worth noting, recent Australian labor market data largely disappointed: total employment in August fell by 5,000 (vs. a +20,000 forecast), with the negative trend driven by a 40,000 drop in full-time jobs (while part-time rose by 35,000). Labor force participation unexpectedly fell to 66.8% (forecast: 67.0%), and the unemployment rate rose to 4.2%.

In summary, the Aussie has only received temporary and limited support—AUD/USD buyers managed a short-lived counterattack but were unable to reverse the trend. Any northern spikes should be seen as an opportunity to open short positions as the US dollar continues to strengthen. Cautious rhetoric from Jerome Powell and other Fed officials has bolstered the greenback across the market, and AUD/USD is no exception.

Downside targets are at 0.6580 (middle Bollinger Band on the daily chart) and 0.6550 (Kijun-sen on the same timeframe).