• Australia’s Consumer Price Index report showed inflation increasing by 2.7%.

• RBA policymakers said they would look beyond a decline in headline inflation.

• Data on Tuesday showed an unexpected decline in US consumer confidence.

The AUD/USD price analysis shows a slight retreat in the bullish trend after a drop in Australia’s inflation raised the probability of an RBA rate cut. Meanwhile, the US dollar was weak after data in the previous session revealed increasing worries about the labor market.

Australia’s Consumer Price Index report showed inflation increasing by 2.7%, a three-year low, in August. Moreover, it was a significant drop from the previous month’s reading of 3.5%. However, the Australian dollar barely fell since economists had expected the drop. Still, it improved the chances of an RBA rate cut in December to 75%.

The Reserve Bank of Australia recently held rates unchanged and noted it was too early to consider rate cuts. Furthermore, policymakers said they would look beyond a decline in headline inflation, which was only temporary. Therefore, more is needed to prompt a more dovish outlook since underlying inflation remains high. Notably, price pressures eased in August due to electricity subsidies by the federal government. The RBA will be under more pressure to lower borrowing costs if underlying inflation drops.

Meanwhile, the greenback remained weak after data on Tuesday showed an unexpected decline in consumer confidence. The Conference Board consumer confidence figure plunged from 105.6 to 98.7in September. More consumers expressed worries about the labor market, noting it was harder to get jobs.

Furthermore, market participants are eagerly awaiting the core PCE figures due on Friday. Coller-than-expected inflation could boost expectations for a massive November Fed rate cut.

AUD/USD key events today

Market participants do not expect any key reports from the US. Therefore, they will keep digesting Australia’s CPI report.

AUD/USD technical price analysis: Bulls pause for breather at 0.6900

On the technical side, the AUD/USD price has paused its rally near the 0.6900 key level. Although it is retreating, the bullish bias remains strong. The price still trades well above the 30-SMA, and the RSI is near the overbought region.

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However, after such a strong rally, bulls seem exhausted. The RSI has made a bearish divergence, showing weaker bullish momentum. Therefore, the price might pull back to retest the 30-SMA before making new highs. However, if bears challenge the SMA support and win, AUD/USD will likely start trending lower.

https://www.forexcrunch.com/blog/2024/09/25/aud-usd-price-analysis-australias-cpi-eases-as-expected/