The Aussie dollar has reached fresh highs today after a stronger inflation report was released overnight.

As we mentioned yesterday, the increase in inflation in Australia, especially in Trimmed Mean inflation - the measure of price increases looked at by the RBA - suggests there are still price pressures in the system and the RBA can't take its foot off the monetary break just yet. Trimmed mean rose by a higher than expected 0.9% in the second quarter, pushing the annual rate to 2.7% from 2.3% in Q1.

This has pushed up Aussie interest rate futures, which measure interest rate expectations. The 3-month future rose 10 basis points in the aftermath of the report. This has also boosted the Aussie, which broke record highs today and is currently trading around 1.1070.

The RBA meets next week, it will be interesting to hear what it makes of the price data. Governor Stevens said earlier this week that there are some advantages to a strong Aussie, and we would expect the Committee to stick to this line and continue to talk up the currency as this may dampen inflation pressure.

What about the Aussie?

AUDUSD is looking overbought on an hourly basis, as you can see in the chart below. It may run into resistance around 1.1070 - a key resistance zone. But support lies at 1.1010. Although the Aussie is vulnerable to a resolution to the US debt crisis that could spark a reversal in the dollar, we think it will hold up better than other currencies against the greenback because of the fundamental factors supporting the Aussie. The next RBA meeting is on Tuesday 2 August. This outcome will determine the direction of the currency for the medium-term in our view.

""

Don't forget that you can now follow Forex.com's research team on Twitter: http://twitter.com/forexresearch

Best Regards,

Kathleen Brooks| Research Director UK EMEA | FOREX.com

d: +44.(0).20.7429.7924 | f: +44.(0).20.7929.2010 | M: +44 (0) 7919.411.957 | e: kbrooks@forex.com| w: www.forex.com/uk

23 College Hill | 3rd Floor | London EC4R 2RT

Now you can follow us on Twitter: http://twitter.com/forexresearch

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that FOREX.com is not rendering investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. FOREX.com is regulated by the Commodity Futures Trading Commission (CFTC) in the US, by the Financial Services Authority (FSA) in the UK, the Australian Securities and Investment Commission (ASIC) in Australia, and the Financial Services Agency (FSA) in Japan.