Australian Dollar remains subdued amid mixed economic data

• Aussie remains weak after CPI data from Australia.
• Markets await the Fed’s decision later in the session.
• Divergences between the RBA and Fed might bail out the Aussie.

The Aussie continues to underperform on Wednesday as markets digest mixed inflation data from Australia. A slightly softer outlook from China continues to fuel concerns about the Australian economy. However, the Reserve Bank of Australia's (RBA) reluctance to introduce rate cuts due to high inflation could provide a safety net for the Aussie.

The continued high inflation pressure on the Australian economy is leading the RBA to hold off on rate cuts. Predictions suggest that the RBA will be among the last of the G10 countries to initiate a rate cut, a move that could limit further downside pressure on the Aussie.

Daily digest market movers: Aussie weakness remains after CPI data from Australia

• The prevalent 'risk-off' sentiment continues due to worries about a slowdown in the Chinese economy, significantly impacting Australia's economic stance. Attention is now focusing on the June and Q2 Consumer Price Index (CPI) figures released on Wednesday.
• The Australian Bureau of Statistics (ABS) reports that Australia's Q2 headline CPI saw an increase of 1.0% QoQ, with an acceleration to 3.8% YoY from the previous 3.6%. At the same time, June's headline CPI is projected to have fallen to 3.8% YoY.
• Considering the inflation rate considerably exceeds the 2-3% target range, the RBA is expected to remain patient with its policy changes. This cautious approach means that the swaps market predicts the first 25 bps cut coming only next summer.
• For the rest of the session, investors will eye the Federal Reserve (Fed) decision that will set the pair’s pace.

AUD/USD technical analysis: Bearish position, bullish traction is not enough to trigger a reaction

The AUD/USD's sustained trade below the 20, 100 and 200-day Simple Moving Average (SMA) confirms an overall bearish outlook. Despite indicator readings remaining firmly in negative territory, the oversold condition might prompt a correction. However, weak bullish momentum could lead to a period of sideways trading unless a major fundamental development occurs.

The key support levels have been adjusted to 0.6530 and 0.6500, with resistance levels at 0.6600 (200-day SMA), 0.6610 and 0.6630.