• US inflation has stalled above the central bank’s target.

• Investors are waiting to see if US inflation will surprise again.

• China’s exports and imports improved in April as domestic and overseas demand improved.

The AUD/USD outlook is relatively flat as the dollar gains ahead of the US inflation report, while the Aussie stands firm thanks to encouraging data from China. The greenback is gaining momentum as markets gear up for next week’s inflation figures, which could change the outlook for Fed rate cuts.

In recent months, the US has released hotter-than-expected inflation numbers, leading to the conclusion that inflation has stalled above the central bank’s target. As a result, policymakers have lost confidence in the progress to lower inflation, leading to confusion about the timing of rate cuts. However, the last jobs report increased expectations that the Fed might start cutting interest rates in September.

Next week, investors will wait to see if inflation will surprise again. A positive surprise could revive the view that the Fed might cut only once or not at all in 2024. Such an outcome would be bullish for the dollar. However, if the recent weakness in the labor market reflects in the inflation report, the chances of a cut in September will increase.

Meanwhile, data from China on Thursday showed the economy was improving. Consequently, the Yuan and the Australian dollar gained. As domestic and overseas demand increased, China’s exports and imports improved in April. Clearly, recent policy support measures have improved economic activity in the fragile economy. Notably, exports expanded by 1.5% on an annual basis in April. Similarly, imports for April expanded by 8.4%, which was well above forecasts for an increase of 4.8%.

AUD/USD key events today

• US initial jobless claims
• US 30-y Bond auction

AUD/USD technical outlook: Bullish bias holds despite a break below the 30-SMA

On the technical side, the AUD/USD price is trading in a tight range near the 0.6575 key level. Moreover, it trades below the 30-SMA with the RSI slightly below 50, indicating a bearish sentiment.

However, the larger bullish trend remains intact because the price still trades above the support trendline. If it fails to break below this trendline, it will reverse and target the 0.6650 level. On the other hand, if it breaks below the trendline, it would confirm a new bearish bias. This would allow the price to reach the 0.6475 support level.

https://www.forexcrunch.com/blog/2024/05/09/aud-usd-outlook-aussie-stabilizes-on-firm-chinese-data/