• Inflation in Australia eased from 4.0% to 3.8% as expected.
• Investors expect the first RBA cut in November.
• The dollar fluctuated as investors held their breath ahead of the Fed policy meeting.

The AUD/USD price analysis is bearish. The Aussie trades near a three-month low after cooler-than-expected inflation data. Meanwhile, investors are on the edge ahead of the FOMC policy meeting.

Data on Wednesday showed that inflation in Australia eased from 4.0% to 3.8% as expected. Meanwhile, the trimmed mean for the second quarter cooled more than expected, from 1.0% to 0.8%. These figures led to a pivot in the Reserve Bank of Australia’s monetary policy outlook.

At next week’s meeting, investors were initially weighing the possibility of a 25bps rate hike. However, the risk of a hike fell significantly after the CPI report. At the same time, markets moved from expecting the first rate cut next year to November.

For a long time, rate-cut bets have shown that the RBA will be among the last major central banks to cut rates. However, if inflation in Australia is dropping faster than expected, this might change. Moreover, the Aussie might fall further if policymakers take a more dovish stance next week.

Meanwhile, the dollar fluctuated as investors held their breath before the Fed policy meeting. Today’s primary focus will be messaging. Traders will wait to see whether policymakers are confident enough to call for a rate cut in September. Before the last inflation report, there was little confidence that price pressures would continue to the 2% target. Consequently, the Fed only projected one rate cut this year. However, since inflation has progressed lower, there is a high chance of a more dovish projection.

AUD/USD key events today

• US ADP non-farm employment change
• US employment cost index q/q
• US pending home sales m/m
• FOMC policy meeting

AUD/USD technical price analysis: RSI signals weaker bearish momentum

On the technical side, the AUD/USD price has made a lower low, indicating a downtrend. At the same time, the price sits far below the 30-SMA with the RSI oversold, supporting the bearish bias. The decline reached the 0.6500 pivotal support level, which could become a strong barrier.

Notably, the RSI has made a bullish divergence, indicating weaker bearish momentum. If bears have weakened, bulls might resurface to retest the 30-SMA. However, the trend will only shift with a break above the SMA.

https://www.forexcrunch.com/blog/2024/07/31/aud-usd-price-analysis-cooler-inflation-drags-to-3-month-low/