• The RBA held rates on Tuesday and restated its commitment to lower stubborn inflation.

• The likelihood of an RBA cut in December increased slightly to 72%.

• PMI data in the previous session revealed steady business activity.

The AUD/USD outlook shows a whiplash reaction to the Reserve Bank of Australia’s policy meeting. The Australian dollar fluctuated after the RBA policy meeting as policymakers remained determined to tame inflation.

The RBA held rates on Tuesday and restated its commitment to lower stubborn inflation. Due to high inflation, policymakers have remained cautious most of this year. At 3.9%, Governor Michele Bullock noted that underlying inflation remains too high. Therefore, further rate hikes are still possible.

The Australian dollar soared immediately after the meeting before collapsing. The whiplash move showed uncertainty among market participants about the outlook for rate cuts. After the meeting, the likelihood of a cut in December increased slightly to 72%.

Meanwhile, the US dollar held steady after PMI data in the previous session revealed steady business activity. At the same time, it indicated rising prices which could translate to higher inflation in the future. The report comes after the Federal Reserve lowered borrowing costs by 50-bps. Higher inflation could reduce the likelihood of another massive rate cut in November. At the moment, market participants are pricing an almost 50% chance of such an outcome. However, things might change as more data comes in.

The market focus will now shift to GDP and core PCE figures. The GDP will show the state of the economy, which has performed better than expected. Meanwhile, the core PCE is a significant measure of inflation for the Fed. Therefore, it will impact expectations for future policy moves.

AUD/USD key events today

• US CB Consumer Confidence

AUD/USD technical outlook: Choppy bullish price action

On the technical side, the AUD/USD price is in a bullish trend above the 30-SMA. At the same time, the RSI trades above 50 in bullish territory. The price recently broke above the 0.6800 resistance level. However, the move above the key level has been weak. The price has risen in a choppy fashion, indicating exhaustion.

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At the same time, the RSI has made a bearish divergence, a sign that bullish momentum is fading. Therefore, it might pull back to retest the 30-SMA. Moreover, it might break below the SMA and the 0.6800 level to reverse the trend.

https://www.forexcrunch.com/blog/2024/09/24/aud-usd-outlook-rba-stays-committed-to-fight-inflation/