CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

• AUD/USD climbed after the RBA pondered rate cuts.
• The Aussie’s extended recovery got hampered after falling just short of 0.6580.
• Fed watchers will be pivoting to Wednesday’s FOMC Meeting Minutes.

The AUD/USD climbed on Tuesday, rebounding from the day’s low near 0.6520 to fall just shy of 0.6580 before pulling back into the day’s range. The Reserve Bank of Australia (RBA) held rates steady early Tuesday as markets broadly expected, but another rate hike is still in the ether and investors will be looking to suss out how close the Federal Reserve (Fed) is to cuttign interest rates when the Federal Open Market Committee’s latest Meeting Minutes drop on Wednesday.

The RBA held rates for the time being, but the Australian central bank’s internal dialogue appears to be leaning towards further rate cuts if faster progress isn’t made on inflation soon. With Australia’s lop-sided economy grappling with a tight labor market and still-high services inflation, the RBA expects it could take until well into 2025 before inflation reaches target levels.

RBA Minutes: Board considered a hike of 25bp or an on hold decision

With the potential for another rate hike on the table, the Aussie (AUD) climbed through Tuesday’s early trading session, before getting pared back during the US market window. 

The mid-week trading session will see eyes on the Fed and its FOMC’s latest Meeting Minutes, slated to release at 19:00 GMT on Wednesday. Investors will be looking to see how close the Fed is to delivering interest rate cuts, with the market broadly expecting a first rate trim in June or July, according to the CME’s FedWatch Tool.

AUD/USD technical outlook

The AUD/USD found its highest bids in nearly three weeks on Tuesday, climbing towards 0.6580 but falling just short of the interim level before getting pulled back into 0.6550 on stiffer US Dollar (USD) flows. The pair is grappling with a low-conviction recovery from the last swing low into 0.6450, and bullish momentum is running into a technical ceiling at the 200-day Simple Moving Average near 0.6565.

Beyond near-term price action, a heavy resistance zone from 0.6620 to 0.6600 weighs on bullish momentum into the medium-term.

AUD/USD hourly chart

AUD/USD daily chart

• AUD/USD trades on a softer note near 0.6532 amid the modest rebound of the USD. 
• RBA’s Bullock said last week that all options are still on the table in terms of monetary policy decisions.
• The RBA Meeting Minutes and the People’s Bank of China's (PBoC) interest rate decision will be closely watched events. 

The AUD/USD pair loses traction below the mid-0.6500s during the early Asian trading hours on Tuesday. The Reserve Bank of Australia (RBA) will publish the minutes of its February monetary policy meeting later in the day. The pair currently trades around 0.6532, down 0.12% on the day. 

The RBA governor Michele Bullock said all options are still on the table in terms of monetary policy decisions. However, the central bank needs to make sure that it doesn’t have to backtrack on inflation, and that inflation doesn't get away. Deutsche Bank analysts showed earlier this month that they expected the RBA to cut interest rates as early as May. Still, most analysts anticipate the Reserve Bank to ease policy between June and December.

On the USD’s front, the Federal Reserve (Fed) shifted to a more dovish stance in December, with markets now pricing in rate cuts by summer. Investors will take more cues from the FOMC minutes for the January meeting, with the focus on any discussion around the timing of rate cuts. The markets anticipate the first 25 basis points (bps) rate cut in 2024 as early as June, according to the CME FedWatch Tools. 

Market players will keep an eye on the RBA Meeting Minutes, followed by the People’s Bank of China (PBoC) interest rate decision on Tuesday. A poll of 27 market watchers conducted this week showed that 92.6% of respondents anticipated the five-year LPR to be cut on Tuesday. They expected a reduction of five to 15 basis points.

• AUD/USD holding steady near 0.6550 with RBA due early Tuesday.
• Wednesday brings the latest FOMC Meeting Minutes from the Fed.
• Australian Judo Bank PMIs slated for early Thursday.

AUD/USD is paddling in circles just below 0.6550 as the pair pulls into the center ahead of Tuesday’s showing from the Reserve Bank of Australia (RBA). Wednesday sees the Federal Reserve’s (Fed) latest Meeting Minutes from the Federal Open Market Committee (FOMC), and early Thursday sees Australia’s latest Purchasing Manager’s Index (PMI) figures for February.

The RBA is expected to hold steady on Tuesday and keep rates pinned where they are. Aussie labor figures disappointed markets recently, but it will likely take several months of soft employment numbers before the RBA gets pushed into a rate cut cycle.

The FOMC’s latest Meeting Minutes, due Wednesday, are going to draw plenty of investor attention as markets try to suss out when the US central bank will begin trimming interest rates. US inflation and a still-tight US labor market continue to flummox rate cut hopes from broader markets. Money markets are currently pricing in a first rate cut from the Fed in June, with the CME’s FedWatch Tool forecasting a 75% chance of at least 25 basis points in rate cuts in June, with at least a further 25 basis points expected in July.

The back half of the trading sees Australian Judo Bank PMI numbers for February, and the Composite Aussie PMI has only printed above 50.0 for four of the last twelve successive prints. Australia’s Judo Bank Services PMI last came in at 49.1, while the Manufacturing component last printed at 50.1.

AUD/USD technical outlook

AUD/USD bounced off the 200-hour Simple Moving Average (SMA) near 0.6510 late last week, leaving the pair positioned in the high end near-term, and the pair is poised for a fresh bullish run at the 0.6600 handle with the Aussie extending a recent bullish reversal. The pair is finding some technical resistance at recent swing highs into 0.6540.

The AUD/USD is looking for a foothold from a recent bottom near 0.6450 after the pair declined from December’s peak near 0.6870, and the pair is still down nearly 5% as January market flows struggle to stem the bearish tide.

AUD/USD hourly chart

AUD/USD daily chart

• AUD/USD trades back and forth near weekly high ahead of the Fed and the RBA minutes.
• The reopening of Chinese markets has provided some strength to the Australian Dollar.
• Stubborn US price pressures fail to provide support to the US Dollar.

The AUD/USD pair consolidates in a narrow range after a sharp rally to near 0.6550 in Monday’s late European session. The Aussie asset is expected to remain on edge ahead of the release of the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) minutes on Tuesday and Wednesday, respectively.

The reopening of Chinese markets after the Lunar New Year celebrations has improved the appeal of the Australian Dollar. Investors will focus on the interest rate decision by the People’s Bank of China (PBoC), which will be announced on Tuesday. The PBoC is expected to maintain a dovish stance as the Chinese economy faces deflation amid weak household spending and lower employment opportunities.

Being a proxy to the Chinese economy, the Australian Dollar strengthens on stimulus support from the PBoC.

Meanwhile, the US Dollar Index (DXY) remains under pressure despite robust United States consumer price inflation and Producer Price Index (PPI) data for January have dampened hopes of rate cuts by the Federal Reserve (Fed).

AUD/USD delivers a solid rally to near weekly high around 0.6540 on an hourly scale. The near-term outlook of the Aussie asset has turned bullish as it has stabilized above the 200-period Exponential Moving Average (EMA), which trades around 0.6517.

The 14-period Relative Strength Index (RSI) trades in the bullish range of 40.00-80.00, indicating more upside ahead.

More upside will appear if the asset breaks above the intraday high of 0.6552, driving the asset towards the round-level resistance of 0.6600, followed by the January 30 high at 0.6625.

In an alternate scenario, a downside move below February 15 low at 0.6477 would activate sellers and expose the asset to February 13 low at 0.6443 and the round-level support of 0.6400.

AUD/USD hourly chart

Having reached a late December high around 0.6871, AUD/USD dipped to 0.6500 this month. Economists at Rabobank analyze Aussie’s outlook.

EUR/AUD to trend lower to 1.5600 on a 12-month view

• AUD/USD trades in positive territory for four consecutive days near 0.6530. 
• The US January PPI came in stronger than expected, rising 0.3% MoM and 0.9% YoY.
• Financial markets are betting that the RBA will cut rates in the middle of the year.

The AUD/USD pair kicks off the new week on a positive note during the early Asian session on Monday. The uptick of the pair is supported by the decline of the US Dollar (USD). AUD/USD currently trades around 0.6530, losing 0.03% on the day. 

Data released by the US Labor Department on Friday showed that the Producer Price Index (PPI) in January increased by 0.3% MoM from a 0.1% decline in December. The gauge rose 0.9% in a year, also exceeding forecasts. The stronger data represent a rise in inflation pressure at the start of 2024. However, the Federal Reserve (Fed) needs more data to consider before starting to cut the interest rate.

Meanwhile, the upside of the pair might be capped by the rising tensions in the Middle East. The leader of Hezbollah, the Iran-backed militant group said it will broaden its war against Israel in the wake of recent strikes between the two sides. This, in turn, could boost a safe-haven currency like the US Dollar (USD) and act as a headwind for the AUD/USD pair. 

The Reserve Bank of Australia (RBA) hasn't been expected to cut rates until after the Fed. Investors are pricing in August as the likely start for RBA rate cuts. Inflation in Australia has cooled down, but the central bank cannot attribute all of this to monetary policy success.  

Looking ahead, the RBA minutes will be released on Tuesday, and the FOMC minutes for the 30-31 January meeting will be due on Wednesday. The Australian Judo Bank PMI data will be released on Thursday, and FOMC Vice Chair Jefferson is set to speak later on the same day. 

• The AUD/USD is trading at 0.6520, gaining 0.40, in Thursday's session.
• Weak Retail Sales data from January from the US weakened the USD.
• If markets continue to delay rate cuts on the Fed, the upside is limited.

On Thursday, the AUD/USD pair traded near 0.6520, marking a gain of 0.40% mainly driven by the report of weak economic data from the United States (US). However, as long as the markets bet on the Federal Reserve (Fed) delaying cuts, the pair may see further downside.

The economic health of the United States remains robust, underpinned by rejuvenated labor markets, accelerating Gross Domestic Product (GDP) growth, and sticky inflation levels. As a reaction, the US Dollar performed strongly against its rivals at the beginning of 2024, as markets started to delay the Fed’s rate cuts to June giving up hopes on a cut in the March and May meetings.

Conversely, the Australian economy has exhibited a modest performance due to persistent pressures in the labor market and tepid inflation growth. The expectation is for the Reserve Bank of Australia (RBA) to hold rates steady until August which may give the Aussie some advantage over the USD but if its economy continues weakening, the upside will be limited.

AUD/USD technical analysis

Based on the daily RSI (Relative Strength Index) values, the index is within the negative territory over the past 10 days. This suggests that selling pressure has been dominant in the market. Looking at the MACD (Moving Average Convergence Divergence) histogram on the daily chart, the color of the bars indicates negative momentum with red bars, reinforcing the steady bearish sentiment.

Overall, in the larger context, the AUDUSD pair remains below its main Simple Moving Averages (SMAs) 20, 100, and 200-day SMAs, suggesting a bearish trend in the broader picture. So unless the buyers make a move above the 20-day average, the outlook will still be negative.

• AUD/USD climbs 0.55%, finding support in lower US Treasury yields and increased risk appetite, trading near 0.6490.
• Fed's Goolsbee hints at inflation path aligning with 2% target, underlining the current restrictive policy stance.
• Australian job market in focus, with expectations of 30K new jobs and a slight uptick in unemployment to 4%.

The Aussie Dollar recovered some ground on Wednesday and climbed 0.55% against the US Dollar, courtesy of falling US Treasury bond yields and risk appetite improvement. The AUD/USD consolidated at around the 0.6450-0.6490s area, and as Thursday’s session began, the pair exchanged hands at 0.6490.

AUD/USD jumps off yearly lows but is not out of the woods with jobs data pending

The economic docket was light following Tuesday’s hot inflation report from the United States. Chicago Fed President Austan Goolsbee crossed the wires and stated higher inflation for a few months would be consistent with a path back to the Fed’s 2% goal. He added the current policy stance is restrictive.

Fed officials adopted a more neutral stance after the first monetary policy decision of the year. Powell’s shrugging off expectations for a rate cut in March and February’s data indicates the economy is still robust. However, before the March and May meeting, there’s a good tranche of data to digest, before Powell and Co. could guide the markets.

In the meantime, the swaps markets see the Fed would cut rates 110 basis points from the current level at the 5.25%-5.50% range.

Aside from this, the Australian economic docket will feature the release of labor market data. Estimates suggest the Aussie’s economy added 30K jobs to the workforce, while the unemployment rate is foreseen at 4%, up from December’s 3.9%.

AUD/USD Price Analysis: Technical outlook

The AUD/USD is downward biased despite posting solid gains on Wednesday. Buyers need to reclaim the 0.6500 if they would like to reclaim the 100-day moving average (DMA) at 0.6537. A breach of the latter will expose the 200-DMA at 0.6565, ahead of 0.6600. On the other hand, the first support is seen at 0.6442, the February 13 low, followed by the 0.6400 mark.

The Australian Dollar (AUD) has been among the weakest performing G10 currencies in early 2024. Economists at Danske Bank analyze Aussie’s outlook.

RBA maintained its monetary policy unchanged in February

• AUD/USD advances toward 0.6500 as the RBA remains open for further policy tightening.
• Investors see the Fed reducing interest rates in June.
• Market participants await fresh guidance from the Australian Employment and the US Retail Sales data.

The AUD/USD pair marches toward the psychological resistance of 0.6500 even though the broader outlook for the US Dollar is bullish. The Aussie asset is up more than 0.4% in Wednesday’s early New York session as Reserve Bank of Australia (RBA) Governor Michele Bullock cautioned that the central bank remains receptive to further rate hikes.

While discussing the timing of rate cuts, RBA Bullock stated that the central bank might consider initiating rate cuts even before inflation decelerates to 2.5%.

Going forward, the Australian Dollar will be guided by the Employment data for January, which will be published on Thursday. According to the expectations, 30K workers were recruited against 65.1K lay-offs in December. The Unemployment Rate is seen rising to 4% from 3.9%. An upbeat Employment data would allow RBA policymakers to hold the Official Cast Rate (OCR) at 4.35% for longer.

Meanwhile, the US Dollar Index (DXY) is struck near a three-month high of 105.00. The USD Index is expected to witness more upside as stubborn United States inflation data has shifted expectations for rate cuts by the Federal Reserve (Fed) to the June monetary policy meeting. The Fed is expected to keep interest rates unchanged in the range of 5.25-5.50% until it gets evidence that inflation will comfortably return to the 2% target.

For further guidance, market participants will focus on the monthly US Retail Sales data for January, which will be published on Thursday. Retail Sales are forecasted to have contracted by 0.1% after expanding by 0.6% in December.

• AUD/USD falls 1.18% to a 2024 low of 0.6442 after US inflation data strengthens Fed's rate position.
• US CPI at 3.1% YoY and core inflation at 3.9% exceed forecasts, driving Treasury yields higher.
• Dollar Index nears three-month high at 104.96, with eyes on surpassing the 105.00 level.
• Fed easing expectations shift to June, as per CME FedWatch Tool, after inflation report.

The AUD/USD edged lower on Tuesday amid a strong US inflation report that pushed aside expectations rate cut expectations of the US Federal Reserve. Therefore, the pair dropped 1.18%, trading at around 0.6455 after hitting a new year-to-date (YTD) low of 0.6442.

Aussie Dollar’s hit a YTD low as the Greenback rallies on high US T-bond yields

The US January Consumer Price Index (CPI) was higher than expected, at 3.1% YoY, justifying the Fed's need to keep rates at the current level. Core readings came at 3.9% YoY, unchanged but above the 3.7% estimated. Following the data, US Treasury yields skyrocketed, lifting the Greenback towards a three-month high, according to the US Dollar Index (DXY).

The DXY is rising 0.70%, up at 104.96, shy of achieving a daily close above 105.00, which could open the door for further upside.

Rate cut estimates for the Fed were pushed back, revealing data from the CME FedWatch Tool. Traders expect the beginning of the easing cycle in June, with odds above 50%. Meanwhile, investors took advantage of the table rate cuts for the March and May meetings, which bolstered the US dollar.

In Australia, the economic schedule is empty, but traders are looking forward to the release of employment figures. Forecasts suggest the economy added 30,000 jobs to the workforce. The unemployment rate is expected to rise from 3.9% to 4%.

AUD/USD Price Analysis: Technical outlook

After clocking a new cycle low below 0.6468, the downtrend remains intact, which opened the door to challenging the 0.6400 figure. A breach of the latter will expose the November 10 low of 0.6338, followed by the 0.6300 mark. Conversely, if buyers reclaim 0.6500, that will pave the way for consolidation within the 0.6500-0.6535, the 100-day moving average (DMA) resistance level.

• AUD/USD dips as the Asian session begins, with traders bracing for US CPI data.
• Expected US CPI at 2.9% YoY, Core CPI at 3.7% may sway Fed rate cut debates, affects USD.
• NY Fed survey maintains steady inflation expectations, highlighting ongoing price pressure concerns.
• RBA's Kohler points to Australia's inflation challenge and muted near-term growth prospects.

The AUD/USD begins the Asian session below its opening price by 0.05% after clocking minimal gains of 0.12% on Monday. A scarce economic calendar kept investors turned to Federal Reserve official's comments, US Treasury yields, and market sentiment, with traders awaiting US inflation figures. At the time of writing, the pair trades at 0.6529 after hitting a weekly high of 0.6543.

Aussie’s economy could cool down in the short term

Sentiment was mixed as Wall Street finished the session with the Dow Jones up but the S&P 500 and the Nasdaq down. Investors seem nervous before Tuesday’s US inflation report, as the January US Consumer Price Index (CPI) is expected at 2.9% YoY, from 3.4%. Core CPI is foreseen at 3.7%, down from 3.9&.

It should be said that Monday’s US calendar revealed a New York Federal Reserve poll on consumer inflation expectations, which came at 3% for one year and 2.5% for five years, unchanged compared to December’s.

Given the backdrop, if inflation continues to fall, that would be negative for the US Dollar, as investors could price in a Fed rate cut sooner rather than later. This follows Fed Chair Powell’s remarks that they could commence easing policy before inflation gets to 2%.

In the meantime, the Reserve Bank of Australia (RBA) Economist Marion Kohler expressed that inflation is still too high, adding that it will take some time to get to its target. She added that services inflation remains high and expects economic growth to remain subdued in the near term.

Data-wise, the Aussie’s economic calendar will feature the Westpac Consumer Confidence poll, along with NAB Business Confidence. On the US front, inflation figures are widely expected.

AUD/USD Price Analysis: Technical outlook

After diving below the 100-day moving average (DMA), the AUD/USD remains neutral to downward biased, supported by buyers keeping the exchange rate above 0.6500. If sellers break below that level, the next support would be February 5 at 0.6468, followed by the psychological 0.6400 level. On the other hand, if buyers reclaim the 100-DMA at 0.6536, that could open the door to challenging the 200-DMA at 0.6568, followed by the 0.6600 mark.

• AUD/USD consolidates above 0.6500 as the focus shifts to US inflation data.
• The Fed is expected to cut interest rates in May.
• The Australian Dollar will dance to the tunes of the Employment data.

The AUD/USD pair trades in a narrow range above the psychological support of 0.6500 in the early New York session. The Aussie asset struggles for a direction as investors await January’s United States Consumer Price Index (CPI) data for fresh guidance.

S&P500 futures display a subdued performance before the opening of US markets. The US Dollar Index (DXY) extends its recovery to 104.20 as investors are cautious ahead of US inflation data, which will be published on Tuesday.

According to the estimates, the headline inflation grew at a slower pace of 3.0% against 3.4% in December. In the same period, core inflation that excludes volatile food and oil prices decelerated slightly to 3.8% from 3.9%. The monthly headline and core inflation rose steadily by 0.2% and 0.3%, respectively.

The continuation of progress in the underlying inflation declining towards the 2% target will increase the odds of a rate cut by the Federal Reserve (Fed). As per the CME Fedwatch, the chances of a rate cut by 25 basis points (bps) in the March monetary policy meeting are small. While for the May meeting, traders see a 53% chance for a rate cut by 25 bps that will push key rates in the range of 5.00-5.25%.

On the Australia Dollar front, investors will focus on the Australian Employment data for January, which will be released on Thursday. Investors anticipate Australian employers hiring 30K workers against 65.1K lay-offs in December. The Unemployment Rate rose to 4% from 3.9% a month ago.

• AUD/USD trades on a weaker note around 0.6520 amid light trading volume.
• Fed officials emphasized that further evidence of progress on inflation is needed before cutting rates.
• RBA’s Bullock stated that the board hasn’t ruled out a further hike in the coming months.
• The January CPI inflation data on Tuesday will be a closely watched event.

The AUD/USD pair remains on the defensive during the early Asian session on Monday. The markets are closed in China for the Lunar New Year holidays. Amid the quiet session in Asia, traders will focus on the risk sentiment in the new week. Later this week, the US Consumer Price Index (CPI) for January will be due. At press time, AUD/USD is trading at 0.6520, losing 0.07% on the day. 

The revised CPI figures rose by 0.2% in December from the previous month, compared to the initial estimate of 0.3%, according to the Bureau of Labor Statistics on Friday. The report indicated inflation climbed in December 2022 and did not fall as previously thought.

Several Federal Reserve (Fed) officials emphasized last week that further evidence of progress on inflation is needed before cutting rates. The January CPI data on Tuesday will be key data, which is projected to show an increase of 0.2% MoM and 3.0% YoY. The Core CPI excludes volatile food and energy prices and is estimated to show an increase of 0.3% MoM and 3.8% YoY. Fed Funds futures have priced in 107 basis points (bps) or about 1% in rate cuts for 2024, down from 158 bps less than a month ago.

On the Aussie front, the Reserve Bank of Australia (RBA) delivered more hawkish bias than the market expected. RBA governor Michele Bullock said on Friday that the board hasn’t ruled out a further increase in interest rates but neither has it ruled it in. Additionally, the concern about deflation in China weighs on sentiment, which might drag the Australian Dollar (AUD) lower and act as a headwind for the AUD/USD pair. 

The market is likely to trade in light trading volume due to the Lunar New Year holidays. Apart from the release of CPI inflation data on Tuesday, investors will keep an eye on multiple Fed speakers this week. These events could give a clear direction for the AUD/USD pair.

• AUD/USD remains on the defensive near 0.6491 amid the firmer USD. 
• US Initial Jobless Claims rose by 218K from a week earlier, stronger than expected. 
• RBA’s Bullock said the board is focused on bringing inflation down, and the evidence of inflation is encouraging.

The AUD/USD pair extends its downside and holds below the 0.6500 mark during the early Asian session on Friday. The hawkish comments from Federal Reserve (Fed) officials and a stronger US Dollar (USD) weigh on the pair. AUD/USD currently trades around 0.6491, losing 0.01% on the day. 

On Thursday, the US weekly Initial Jobless Claims fell to 218K for the week ended February 3 from the previous week of 227K, better than the estimation of 220K. The report indicated ongoing labor market resilience. Continuing Claims decreased by 23K to 1.891M in the week ended January 27. Finally, Wholesale inventories of merchant wholesalers lifted 0.4% MoM and were down 2.7% YoY.

Many Fed officials signaled that they were in no rush to lower borrowing costs until they were confident that inflation would return to the 2% target. On Thursday, Fed Richmond President Thomas Barkin reiterated that policymakers have time to be patient about the timing of rate cuts due to a solid labor market and ongoing disinflation. The US central bank has raised its policy rate by 525 basis points (bps) to the current 5.25% to 5.50% range since March 2022.

Late Thursday, Reserve Bank of Australia (RBA) Governor Michele Bullock stated that the central bank is focused on bringing inflation down, and the evidence of inflation is encouraging. Bullock emphasized that the board hasn’t ruled out a further interest rate hike but neither has it ruled it in.

Dallas Fed L. Logan is set to speak later on Friday. In the absence of top-tier economic data from the US and Australia, risk sentiment will likely play a crucial role in the AUD/USD pair.

• AUD/USD resumed the decline and retreats below 0.6500.
• The recovery in the greenback put the AUD under pressure.
• Inflation Rate in China surprised to the downside.

The Australian dollar came under renewed selling pressure amidst the solid performance in the Greenback on Thursday.

Indeed, the greenback set aside two daily declines in a row and reclaimed the area north of 104.00 the figure when gauged by the USD Index (DXY). This rebound occurred amid steady investor speculation about a potential interest rate cut by the Federal Reserve (Fed) in either May or June.

Turning to domestic factors, the AUD’s weakness remained propped up by the generalized bearish trend in the commodity complex, where copper prices and iron ore extended further their retracements.

Also weighing on the Aussie Dollar emerged another lower-than-expected inflation figures in China in the first month of the year.

In the meantime, market participants continued to evaluate the Reserve Bank of Australia's (RBA) latest interest rate decision, which kept rates unchanged at 4.35% while delivering a hawkish message that left a potential future rate hike in the pipeline for the time being.

Still around the RBA and its Statement on Monetary Policy (SoMP), the bank slightly lowered its inflation forecasts, anticipating both metrics to remain below 3% by the fourth quarter of 2025. Additionally, the RBA revised down its GDP growth projections, reflecting a less optimistic outlook for consumer spending and housing investments in the near term.

Governor Bullock's departure from the expected move towards a dovish stance further tempered the pair's upward potential. She emphasized the incomplete nature of addressing inflation and highlighted the current inflation rate as unacceptably high.

AUD/USD daily chart

AUD/USD short-term technical outlook

Further losses in the AUD/USD should pass its 2024 level of 0.6468 (February 5), setting up a potential test of the 2023 low of 0.6270 (Oct 26). The breach of the latter may result in a move to the round level of 0.6200 before the 2022 low of 0.6169 (October 13).

On the upside, the key 200-day SMA at 0.6571 is ahead of the intermediate 55-day SMA at 0.6642. The breakout of this zone may push the pair to attempt the December 2023 top of 0.6871 (December 28), followed by the July 2023 peak of 0.6894 (July 14) and the June 2023 high of 0.6899 (June 16), all right before the key 0.7000 threshold.

The 4-hour chart turned bearish, paving the way for a dip to 0.6452 once 0.6468 is cleared. On the bullish side, 0.6610 is an immediate hurdle ahead of the 200-SMA at 0.6650. The surpassing of this zone indicates a possible progress to 0.6728. The MACD remains well in the negative zone, and the RSI deflated to the 36 zone.

View Live Chart for the AUD/USD

• AUD/USD slumps below 0.6500 on cautious market mood.
• The Australian Dollar weakens as upside risks to China’s deflation deepen.
• The outlook for the Aussie asset weakens after an H&S breakdown.

The AUD/USD pair falls sharply below the psychological support of 0.6500 in the early New York session. The Aussie asset faces a sharp sell-off as investors turn anxious amid an absence of potential economic triggers.

The US Dollar Index (DXY) delivers a sharp recovery after consolidating near 104.00 as Federal Reserve (Fed) policymakers avoid speculating over the timing of rate cuts. Policymakers said they need more evidence indicating that inflation will sustainably return to the 2% target.

As per the CME Fedwatch tool, a rate-cut decision in March is unlikely. For May, chances in favor of a 25-basis point (bp) are stable at 54%.

Meanwhile, the Australian Dollar weakens against the US Dollar as upside risks to deflation in the Chinese economy have prompted the need for more stimulus from the People’s Bank of China (PBoC).

Annual consumer prices were deflated at a robust pace of 0.8% against expectations of 0.5% and the prior reading of 0.3%. Producers at factory gates slash prices at factory gates significantly due to poor aggregate demand. Being a proxy to China’s economy, the appeal for the Australian Dollar weakens.

AUD/USD witnesses a steep fall after a breakdown of the Head and Shoulder chart pattern formed on a daily time frame. The necklines of the aforementioned chart pattern is plotted from December 7 low at 0.6525. A bear cross, represented by the 20 and 50-day Exponential Moving Averages (EMAs) at 0.6625, indicates more weakness ahead.

The 14-period Relative Strength Index (RSI) has shifted into the bearish range of 20.00-40.00, which indicates momentum has leaned towards the downside.

Selling pressure would accelerate if the Aussie asset will drop below February 6 low of 0.6478, which will expose the asset to October 11 high at 0.6445. A downside move below the latter would drag the asset towards the round-level support of 0.6400.

In an alternate scenario, a recovery move above January 25 low at 0.6566 would drive the asset toward the round-level resistance of 0.6600, followed by January 30 high at 0.6625.

AUD/USD daily chart

• AUD/USD moves sideways near 0.6520 in Thursday’s early Asian session. 
• Fed’s speech did not impact the market much; the central bank needs to see more evidence of inflation data. 
• Futures market traders expect the first rate cuts for the RBA will most likely occur in September rather than August.
• Traders will closely monitor the Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) on Thursday.

The AUD/USD pair consolidates above the 0.6500 psychological mark during the early Asian section on Thursday. The sell-off in the US Dollar (USD) and prevailing risk-on environment lend some support to the pair. More Fed speakers are scheduled for later on Thursday and Friday, amid the quiet week in terms of economic data releases. At press time, AUD/USD is trading at 0.6520, gaining 0.02% on the day.

Several Fed speakers endorsed the data-driven approach and high for longer narrative. On Wednesday, Federal Reserve (Fed) Governor Adriana Kugler said that inflation is showing solid signs of slowing down, but she is not yet prepared to begin lowering interest rates. Meanwhile, Minneapolis Fed President Kashkari said that the Fed needs more time to gain confidence in the inflation trajectory before beginning to cut rates. He suggested that two to three rate cuts would seem appropriate for 2024, based on current data.

Boston Fed President Collins said that the chances of inflation being over 2% have receded while noting that the path to the 2% target may be rough and rocky. She said that additional evidence is needed to consider rate cuts. The speech did not impact the market much from what we heard at Fed Chair Powell's press conference, The central bank needs to see more inflation data to ensure that it returns to a 2% inflation target sustainably

On the Aussie front, the Reserve Bank of Australia (RBA) kept the interest rate steady on Tuesday and stated that a further hike could not be ruled out as inflation remains too high. Futures market traders anticipate the first easing for the RBA will most likely occur in September rather than August. This, in turn, boosts the Australian Dollar and acts as a tailwind for the AUD/USD pair.

Moving on, the Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) for January are due on Thursday. The weaker-than-expected outcome could exert some selling pressure on the Aussie. Also, the US weekly Initial Jobless Claims are due on Thursday, along with Wholesale Inventories and the speech by Fed’s Barkin (Richmond).

• AUD/USD delivers a sustained move above 0.6500 amid a cheerful market mood.
• The USD Index corrects despite the Fed maintaining a restrictive interest rate stance.
• Going forward, China’s inflation data will guide the Australian dollar.

The AUD/USD pair climbs comfortably above the psychological resistance of 0.6500 in the late European session on Wednesday. The US Dollar Index (DXY) has edged down from an 11-week high of 104.50, although chances of an interest rate cut by the Federal Reserve (Fed) in March’s monetary policy meeting have been ruled out.

S&P500 futures have generated significant gains in the London session, portraying an improvement in the risk appetite of the market participants.

The US Dollar is facing significant pressure despite the Fed emphasizing keeping interest rates higher. Fed policymakers are not convinced that inflation will sustainably return to the 2% target.

Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday deepening uncertainty over inflation is not allowing policymakers to comment about when the central bank will start reducing interest rates. Mester warned that interest rates could be restrictive for longer if price pressures appear to be stalling at a level or above our goal.

Meanwhile, investors await commentaries from Richmond Federal Reserve Bank Thomas Barkin and Federal Reserve Governor Michelle Bowman for further guidance.

On the Australian Dollar front, investors are shifting their focus on China’s Consumer Price Index (CPI) data for January, which will be published on Thursday. Investors anticipate that the Chinese economy was deflated by a higher pace of 0.5% against 0.3% in December. Being a proxy to China’s economic condition, the situation of deflation will weigh on the Australian Dollar.

This week, the Reserve Bank of Australia (RBA) kept its Official Cash Rate (OCR) unchanged at 4.35%, leaving doors open for further policy tightening.