• Economists expect a slight drop in Australia’s inflation, from 3.5% to 3.4%.

• Investors are only pricing in a 30% chance that the RBA will cut rates in December.

• Markets are awaiting Friday’s US core PCE price index.

The AUD/USD price analysis indicates a resurgence in bullish momentum ahead of inflation data from Australia and the US. At the same time, the dollar was weaker as its recent rally ran out of steam. Investors are now awaiting fresh clues on the future path of Fed policy.

Australia will release its CPI report on Wednesday, and economists expect a slight drop from 3.5% to 3.4%. This figure will influence the outlook for RBA rate cuts. Currently, markets expect the Reserve Bank of Australia to be among the last major central banks to cut interest rates.

Notably, policymakers have remained cautious due to the stubborn services inflation in the country. Consequently, investors are only pricing in a 30% chance that the central bank will cut rates in December. Moreover, they are only fully pricing in the first rate cut in May next year. This will keep the Aussie strong, as the Fed might start cutting rates before the RBA.

Meanwhile, data on Tuesday revealed a small increase in Australia’s retail sales of 0.1% in April after a 0.4% drop the previous month. However, economists had expected a bigger growth of 0.2%. This indicates weak consumer spending due to high borrowing costs.

Elsewhere, the dollar paused its rally from last week when US data showed a resilient economy and lowered expectations for Fed rate cuts. Investors have digested the mixed economic signals and now await Friday’s core PCE price index.

AUD/USD key events today

• US CB consumer confidence

AUD/USD technical price analysis: Price rises to retest broken trendline

On the technical side, the AUD/USD price has broken above the 30-SMA after finding support at the 0.6600 level. Previously, there had been a significant shift in sentiment when the price broke below its bullish trendline. However, it paused at the 0.6600 level and might rise to retest the trendline as resistance.

Moreover, there is strong resistance at the 0.6700 level. Therefore, if this is only a retest of the recently broken trendline, the downtrend will resume with a break below 0.6600. However, if bulls have retaken control, the price will break above 0.6700 to make new highs.

https://www.forexcrunch.com/blog/2024/05/28/aud-usd-price-analysis-aussie-gains-ahead-of-inflation-data/