- Australia released data showing inflation slowed to a four-month low in July.
- Investors reduced the likelihood of a November RBA rate cut from 58% to 48.4%.
- Market participants look forward to US GDP and PCE data.
AUD/USD price analysis paints a bullish picture. Aussie rises after Australian inflation beats forecasts. Meanwhile, the dollar fell as investors awaited more clues on the Fed’s rate cut prospects.
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Australia released data on Wednesday showing inflation slowed to a four-month low in July. It is significant that the consumer price index decreased from 3.8% in June to 3.5% in July. However, the figure was below estimates for a 3.4% increase. Moreover, most of this move was due to the drop in electricity prices after government subsidies. Accordingly, investors reduced the likelihood of a November RBA rate cut from 58% to 48.4%.
The Reserve Bank of Australia remained hawkish on high core inflation. Regardless, the markets are fully pricing in at least one rate cut by the end of the year. This outlook is stable as the Fed is also likely to start reducing borrowing costs in September.
The dollar has remained fragile since Powell gave the green light for a rate cut during the Jackson Hole Symposium. Investors fully expect a rate cut in September. However, it could be a reduction of 50 bps or 25 bps.
If pre-meeting data shows further economic weakness, the Fed will opt for a bigger rate cut. On the other hand, if the data meet forecasts or are slightly higher, policymakers will vote for a smaller cut. Market participants look forward to US GDP and PCE data.
AUD/USD key events today
Investors will continue to digest the Australian inflation report as no other key reports are scheduled for today.
AUD/USD Price Technical Analysis: Bulls lose strength near 0.68
On the technical side, the AUD/USD price rose to retest the 0.6800 resistance level. Bulls are in the lead as the price is above the 30-SMA. At the same time, the RSI is supporting the bullish momentum above 50. However, it is also showing a bearish divergence that indicates a weakening of the bullish momentum.
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If the bulls turn weaker, they may not be able to break the 0.6800 resistance. Accordingly, the price could return to the SMA or reverse to the downside. However, an increase in momentum could allow AUD/USD to make a new high above 0.6800.
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