AUD/USD dips amid US inflation report, as Fed rate cut expectations recalibrate

• AUD/USD trends lower after US inflation data prompts rethink on Federal Reserve's easing timeline.
• February’s CPI report at 3.2% YoY fuels US Dollar strength, overshadowing Australian business sentiment.
• Traders recalibrate rate cut expectations, with focus shifting to upcoming US retail sales data for further cues.

The Australian Dollar printed back-to-back negative days during the week against the US Dollar, courtesy of a warm inflation report in the United States (US) that justified the Federal Reserve’s stance to be patient in cutting borrowing costs. On Tuesday, the AUD/USD was down 0.11%, and as the Wednesday Asian session commences, it trades virtually unchanged at 0.6606.

Aussie Dollar on the defensive as US CPI surpasses forecasts, Fed rate cut estimates adjust

The US Bureau of Labor Statistics (BLS) revealed that February’s inflation was slightly higher than expected. The Consumer Price Index (CPI) in February exceeded estimates of 3.1% YoY as inflation printed 3.2% and above January’s 3.1%. Underlying inflation, as measured by the core CPI, stood at 3.8% YoY, down from 3.9%, but missed the consensus of 3.7%.

After the data, the AUD/USD extended its losses as US Treasury bond yields rose, underpinning the Greenback. The US Dollar Index (DXY), a gauge of the buck’s value against a basket of peers, gained 0.18%, up at 102.92, with buyers shy of reclaiming the 103.00 mark.

Following the US data release, the CME FedWatch Tool shows traders increased their bets for a 25-basis-point rate cut in June, down from 72% a day ago to 68%.

The Aussie’s economic docket on Tuesday featured NAB Business Conditions for February. Conditions improved from 6.0 to 10.0, while Business Confidence deteriorated from 1.0 to 0.0.

Ahead of the week, the Australian economic docket is empty, while in the US, it is not. US Retail Sales for February are expected to rise by 0.8% MoM, and the control group (used to calculate the Gross Domestic Product) at 0.4% MoM

AUD/USD Price Analysis: Technical outlook

The AUD/USD registered two straight sessions with lower closes, suggesting that sellers gathered momentum, but the Relative Strength Index (RSI) indicator shows another story. As the pair extended its losses, the RSI is flat, while the 100-day moving average (DMA) crossed four days ago above the 200-DMA.

That said, the DMAs are in perfectly bullish order, which could signal that buyers are in charge. Nevertheless, they must reclaim the March 12 high at 0.6638 so they can challenge the March 8 cycle high at 0.6667. Further upside is seen at 0.6700. On the other hand, if sellers drag the AUD/USD below 0.6600, further downside is seen, with the confluence of the 50 and the 100-DMA at 0.6573/75 seen as first support, followed by the 200-DMA at 0.6560.