Monday, July 22, 2024
Home CommoditiesForex AUD/USD Outlook: Dollar steadies ahead of CPI, FOMC

AUD/USD Outlook: Dollar steadies ahead of CPI, FOMC

by xyonent
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  • The dollar remained firm even after the recent surge in Treasury yields.
  • All eyes are on the Consumer Price Index report and the Fed meeting.
  • Data released by Australia on Tuesday revealed that the economy weakened in May.

The AUD/USD outlook is trending lower as the USD remains firm ahead of the US CPI data and the FOMC policy meeting, while the AUD weakened after data showed an economic recession in May.

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The dollar held firm after a recent surge in U.S. Treasury yields following better-than-expected jobs data on Friday, which renewed doubts that a slowing U.S. economy could prompt the Fed to start cutting interest rates.

All eyes are now on the Consumer Price Index report and Federal Reserve meeting for further clues as to when the Fed will start cutting interest rates. Inflation forecasts indicate that the headline figure will ease to 0.1% from 0.3% last month.

The inflation report determines the stance policymakers adopt at FOMC meetings: a high reading means policymakers are less confident that inflation will reach the 2% target and may take a more hawkish stance, whereas a low reading may allow policymakers to take a more dovish stance.

Meanwhile, data out of Australia on Tuesday revealed that profit and sales growth slowed and the economy weakened in May, but there were signs that cost pressures were accelerating, creating a mixed picture for the Reserve Bank of Australia (RBA). That said, investors are finally fully pricing in the RBA’s first interest rate cut in July next year.

Major Events for AUD/USD Today

There are no significant events scheduled for today in Australia or the US, so investors will likely continue to speculate ahead of the US inflation report.

AUD/USD Technical Outlook: Bears intensify within the bearish channel

AUD/USD 4-hour chart

On the technical front, the AUD/USD price is trading well below the 30-day SMA and the RSI is in the bearish territory below 50. Hence, the bias is bearish. At the same time, the price is trading inside a bearish channel, respecting solid support and resistance.

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The recent decline reached the support level at 0.6580, where the price took a breather and the bulls took the lead. However, the bullsโ€™ move seems to be much weaker than the decline. Hence, there is a possibility that the price will take a breather at the 30-SMA, where the bears will take the lead again. If that happens, the price is likely to break out of the support at 0.6580 and make a new low.

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