- Inflation in Australia eased from 4.0% to 3.8% as expected.
- Investors expect the first RBA reduction in November.
- The dollar oscillated as investors held their breath ahead of the Fed’s policy meeting.
AUD/USD price analysis is bearish. The Aussie is trading near a three-month low after cooler-than-expected inflation data. Meanwhile, investors are on edge ahead of the FOMC policy meeting.
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Data on Wednesday showed inflation in Australia eased from 4.0% to 3.8% as expected. Meanwhile, the trimmed mean for the second quarter cooled more than expected, from 1.0% to 0.8%. These figures led to a reversal in the outlook for the Reserve Bank of Australia’s monetary policy.
At next week’s meeting, investors initially considered a 25 basis point rate hike. However, upside risk has declined significantly following the CPI report. At the same time, the markets moved from expecting the first rate cut next year to November.
For a long time, interest rate cut bets indicated that the RBA would be among the last major central banks to cut rates. However, if inflation in Australia declines faster than expected, that could change. Moreover, the Australian could fall further if policymakers take a more dovish stance next week.
Meanwhile, the dollar oscillated as investors held their breath ahead of the Fed’s policy meeting. Today’s primary focus will be messaging. Traders will wait to see if policymakers are confident enough to push for a rate cut in September. Before the latest inflation report, there was little confidence that price pressures would continue to the 2% target. Accordingly, the Fed has forecast just one rate cut this year. However, since inflation has moved lower, there is a good chance for a better projection.
AUD/USD key events today
- Change in non-agricultural employment in the US ADP
- US employment cost index c/c
- USA pending house sales m/m
- FOMC Policy Meeting
AUD/USD Price Technical Analysis: RSI Signals Weaker Bearish Momentum
On the technical side, the AUD/USD price made a lower low, indicating a downtrend. At the same time, the price is sitting well below the 30-SMA with the RSI oversold, supporting the bearish bias. The decline reached the key support level of 0.6500, which could become a strong barrier.
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Notably, the RSI has made a bullish divergence, indicating weaker bearish momentum. If the bears have weakened, the bulls could re-emerge to retest the 30-SMA. However, the trend will only change with a break above the SMA.
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