- The AUD/USD pair fell to new lows since Friday.
- The probability of a 50 basis point Fed rate cut in September has dropped from around 50% to 30%.
- Business conditions in Australia fell 3 points to +3, the lowest level in two and a half years.
The outlook for AUD/USD leans further bearish as the dollar stabilizes ahead of key US inflation numbers. In previous sessions, the dollar strengthened as the likelihood of a massive Fed rate cut fell after Friday’s nonfarm payrolls report.
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The AUD/USD pair fell to new lows since Friday. The decline came as the dollar surged after a mixed US jobs report. Market participants were waiting for clues on the size of the Fed’s first rate cut. In particular, employment growth slowed while unemployment decreased. The report showed that the labor market is gradually easing. It therefore indicated that there was no need for a massive rate cut, boosting the dollar.
The probability of a 50 basis point Fed rate cut in September has dropped from around 50% to 30%. The CPI report could shed more light on the upcoming policy meeting. Analysts believe price pressures cooled from 2.9% to 2.6% in August. Meanwhile, the monthly figure could hold steady at 0.2%. The CPI report will support a rate cut of 50 basis points if inflation eases more than expected. On the other hand, if inflation meets forecasts or is slightly higher, bets for a 25 bps rate cut will increase.
Meanwhile, data on Tuesday showed business conditions in Australia fell 3 points to +3, the lowest level in two-and-a-half years in August. Although the economy is weak, policymakers are maintaining a cautious tone, saying inflation remains high. Still, investors estimate an 80% chance of an RBA rate cut in December.
AUD/USD key events today
Investors are not expecting any key economic reports from Australia or the US today. Therefore, the pair could be consolidated.
AUD/USD Technical Outlook: Downtrend could test 0.6600 support
From the technical side, AUD/USD the price is in a clear downtrend and made a new low below the key level of 0.6700. The price is well below the SMA with the RSI near the oversold region, indicating a strong bearish bias.
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Initially, the bears paused at the 0.6700 support level, allowing the price to retest the 30-SMA. However, price action showed weak bullish momentum. Accordingly, the price soon bounced lower with a strong bearish candle. With such solid momentum, the price is likely to reach the 0.6600 support soon.
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