AUD/USD Forecast: Undecided, weakening below 0.6700
AUD/USD Current Price: 0.6681
- Australian Monthly CPI slowed more than forecast in February to 6.8% YoY.
- RBA is now seen pausing next week’s meeting.
- AUD/USD drops below 0.6700, holds above short-term uptrend line.
The AUD/USD dropped on Wednesday, unable to hold above 0.6700 amid increasing odds of a pause from the Reserve Bank of Australia (RBA) at next week’s meeting and a higher US Dollar. The pair stabilized around 0.6680, supported by the ongoing improvement in risk sentiment.
The Australian February Monthly Consumer Price Index (CPI) came in below expectations, with the headline rate falling from 7.4% YoY in January to 6.8% in February, against the forecast of 7.2%. Nevertheless, the CPI inflation remains well above the 2-3% target range. The numbers boosted expectations that the RBA will keep rates unchanged at 3.60% next week. Analysts point out that a pause makes sense considering the ongoing slowdown in inflation and recent market turmoil. Even if the RBA stays on hold, it is not yet time to announce that the tightening cycle has ended, as inflation is above the target and the labor market remains tight.
Market’s reaction to Australian inflation numbers shows it was not a significant surprise. Despite rising speculations that the RBA is closer to a pause, the Aussie showed resilience. AUD/USD dropped modestly after the release, and AUD/NZD fell to three-day lows at 1.0685 but later jumped to 1.0748, the highest in a week.
The next economic report from Australia will be Private Sector Credit on Friday. More important for traders will be news about global banking sector and US data, particularly Friday’s Core Personal Consumer Expenditure Price Index. The US Labor Department will release its weekly Jobless Claims report on Thursday.
AUD/USD short-term technical outlook
The AUD/USD is consolidating around 0.6680, moving without a clear bias after being rejected from above 0.6700. The 4-hour chart shows the price around the relevant moving averages, offering no signs, with the RSI flat at 50. A key support in the short-term is seen in the band 0.6650/0.6660, the convergence of an uptrend line from the March low and a horizontal support. A slide below would increase bearish risks, exposing 0.6630.
The daily chart does not offer better clues. The pair settles at the 20-period Simple Moving Average (SMA) but under other key SMAs. A daily close above 0.6720 would strengthen the Aussie, while under 0.6630 should expose the March low.
Support levels: 0.6650 0.6630 0.6600
Resistance levels: 0.6715 0.6740 0.6785
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