- The dollar remained strong after a recent rise in Treasury yields.
- All eyes are on the CPI report and the Fed meeting.
- Data from Australia on Tuesday revealed weaker business conditions in May.
The AUD/USD outlook points south as the greenback holds firm ahead of US consumer inflation data and the FOMC policy meeting. Meanwhile, the Australian dollar was weak after data revealed weaker business conditions in May.
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The dollar remained strong after a recent rise in Treasury yields on better-than-expected jobs numbers. Friday’s US jobs report renewed doubts about a slowdown in the US economy that would allow the Fed to start cutting rates.
All eyes are now on the CPI report and the Fed meeting for more clues on when the Fed might start cutting interest rates. Inflation forecasts showed the headline figure eased to 0.1% from 0.3% the previous month.
The inflation report will determine the tone policymakers will adopt at the FOMC meeting. A higher number will reduce policymakers’ confidence that inflation will reach the 2% target, leading to hawkishness. On the other hand, a slower inflation rate could allow policymakers to take a more dovish stance.
Meanwhile, data from Australia on Tuesday revealed weaker business conditions in May as profits and sales growth fell. However, there were signs that cost pressures were accelerating, creating a mixed picture for RBA. Regardless, investors are fully pricing in the RBA’s first rate cut in July next year.
AUD/USD key events today
There are no key events scheduled from Australia or the US today. Therefore, investors will continue to speculate ahead of the US inflation report.
AUD/USD Technical Outlook: Bears are intensifying within a bearish channel
On the technical side, AUD/USD is trading well below the 30-SMA, with the RSI in bearish territory below 50. Therefore, the bias is bearish. At the same time, the price is trading within a bearish channel, respecting firm support and resistance.
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The recent decline reached the 0.6580 support level, where the price paused and the bulls took over. However, the bullish move looks much weaker than the decline. Therefore, there is a chance that it will stop at the 30-SMA, where the bears will continue to control. If that happens, the price is likely to break out of the 0.6580 support for a new low.
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