- Economists expect a slight drop in inflation in Australia, from 3.5% to 3.4%.
- Investors are pricing in only a 30% chance that the RBA will cut rates in December.
- Markets await Friday’s core US PCE price index.
AUD/USD price analysis points to a revival of bullish momentum ahead of inflation data from Australia and the US. At the same time, the dollar was weaker as its recent rally stopped working. Investors are now waiting for new clues about the Fed’s future policy path.
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Australia will release its CPI report on Wednesday, with economists expecting a slight drop from 3.5% to 3.4%. This figure will influence the prospects for an RBA rate cut. Currently, markets expect the Reserve Bank of Australia to be among the last major central banks to cut interest rates.
In particular, policymakers remained wary of the country’s stubborn services inflation. Accordingly, investors are pricing in only a 30% chance that the central bank will cut rates in December. Moreover, they only fully set prices in the first rate cut in May next year. This will keep the Aussie strong as the Fed may start cutting rates before the RBA.
Meanwhile, data on Tuesday revealed a small 0.1% rise in Australian retail sales in April after a 0.4% drop the previous month. However, economists expected a higher growth of 0.2%. This indicates weak consumer spending due to high borrowing costs.
Elsewhere, the dollar paused its gains from last week as US data showed a resilient economy and lowered expectations for a Fed rate cut. Investors have picked up on the mixed economic signals and are now awaiting Friday’s core PCE price index.
AUD/USD key events today
- US CB Consumer Confidence
AUD/USD Price Technical Analysis: Price is rising to retest the broken trend line
On the technical side, the AUD/USD price broke above the 30-SMA after finding support at the 0.6600 level. Earlier, there was a significant change in sentiment when the price broke below its bullish trend line. However, it paused at the 0.6600 level and could rise to retest the trend line as resistance.
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Furthermore, there is strong resistance at the 0.6700 level. Therefore, if this is just a retest of the recently broken trend line, the downtrend will continue with a break below 0.6600. However, if the bulls regain control, the price will break above 0.6700 to reach new highs.
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