- The dollar fell on Wednesday after weaker-than-expected consumer inflation data.
- Fed policymakers had forecast just one rate cut in 2024.
- Data on Thursday showed a stronger-than-expected rise in Australian employment in May.
AUD/USD forecast shows fresh bearish sentiment as dollar rebounds after FOMC policy meeting. Meanwhile, the Australian dollar barely reacted to news that the Australian labor market remained resilient in May.
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The dollar fell on Wednesday after weaker-than-expected consumer inflation data. The consumer price index was unchanged in May compared to forecasts of a 0.1% increase. This was the second month of easing inflation, leading to increased confidence that the Fed will cut rates in September. Consequently, Treasury yields fell. If inflation returns, policymakers will be in a better position to switch to a more dovish tone.
However, that move was soon reversed as Fed officials wrapped up their policy meeting. Policymakers have forecast just one rate cut in 2024, compared to market expectations of at least two. Moreover, they noted that the outlook will largely depend on incoming data. Still, the drop in inflation was a step in the right direction that will pave the way for a rate cut in the US. The outcome of the political meeting boosted the greenback, which weighed on the Australian dollar.
Meanwhile, data on Thursday showed a stronger-than-expected rise in Australian employment in May. The country added 39,700 jobs, well above economists’ expectations of 30,000. Meanwhile, the unemployment rate fell from 4.1% to 4.0%, showing resilience in the labor market. However, the Australian dollar barely reacted as traders already do not expect an RBA rate cut this year. There is less than a 50% chance that the RBA will cut rates in December.
AUD/USD key events today
- US PPI report
- US unemployment claims
AUD/USD Technical Forecast: Bulls break solid resistance
On the technical side, the AUD/USD price made a sharp, bullish move that broke through its channel resistance before retreating. This is a sign that the bulls are gaining momentum and could soon break out of the bearish channel.
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Notably, the price is above the 30-SMA while the RSI is above 50, supporting solid bullish momentum. Although it is back inside the channel, the bulls may soon retest the channel resistance and the 0.6680 resistance level. A break above these levels would allow the price to retest the resistance at 0.6720.
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