- Australia released data showing inflation slowed to a four-month low in July.
- Investors reduced the likelihood of a November RBA rate cut from 58% to 48.4%.
- Market participants are looking forward to US GDP and PCE data.
The AUD/USD price analysis paints a bullish picture. The Aussie is edging higher after Australia’s inflation beat forecasts. Meanwhile, the dollar wallowed as investors awaited more clues on the Fed’s rate cut outlook.
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On Wednesday, Australia released data showing inflation slowed to a four-month low in July. Notably, the Consumer Price Index eased from 3.8% in June to 3.5% in July. However, the figure came below estimates for a 3.4% increase. Moreover, most of the move came due to a decline in electricity prices after state subsidies. Consequently, investors reduced the likelihood of a November RBA rate cut from 58% to 48.4%.
The Reserve Bank of Australia has remained hawkish due to high underlying inflation. Nevertheless, markets are fully pricing at least one rate cut by the end of the year. This outlook has held steady since the Fed will also likely start lowering borrowing costs in September.
The greenback has remained fragile since Powell gave the green light for rate cuts during the Jackson Hole Symposium. Investors fully expect a rate cut in September. However, it could be a 50 bps or a 25 bps cut.
If data before the meeting shows further economic weakness, the Fed will opt for the bigger rate cut. On the other hand, if data meets forecasts or is slightly higher, policymakers will vote for the smaller cut. Market participants are looking forward to US GDP and PCE data.
AUD/USD key events today
Investors will keep digesting Australia’s inflation report as no other key reports are scheduled for today.
AUD/USD technical price analysis: Bulls lose steam near 0.68
On the technical side, the AUD/USD price has risen to retest the 0.6800 resistance level. Bulls are in the lead because the price sits above the 30-SMA. At the same time, the RSI supports bullish momentum above 50. However, it also shows a bearish divergence that indicates fading bullish momentum.
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If bulls are getting weaker, they might fail to breach the 0.6800 resistance. Consequently, the price might return to the SMA or reverse to the downside. However, a surge in momentum could allow AUD/USD to make a new high above 0.6800.
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