AUD/USD creeps lower ahead of US inflation data, RBA’s Kohler comments

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  • AUD/USD dips as the Asian session begins, with traders bracing for US CPI data.
  • Expected US CPI at 2.9% YoY, Core CPI at 3.7% may sway Fed rate cut debates, affects USD.
  • NY Fed survey maintains steady inflation expectations, highlighting ongoing price pressure concerns.
  • RBA’s Kohler points to Australia’s inflation challenge and muted near-term growth prospects.

The AUD/USD begins the Asian session below its opening price by 0.05% after clocking minimal gains of 0.12% on Monday. A scarce economic calendar kept investors turned to Federal Reserve official’s comments, US Treasury yields, and market sentiment, with traders awaiting US inflation figures. At the time of writing, the pair trades at 0.6529 after hitting a weekly high of 0.6543.

Aussie’s economy could cool down in the short term

Sentiment was mixed as Wall Street finished the session with the Dow Jones up but the S&P 500 and the Nasdaq down. Investors seem nervous before Tuesday’s US inflation report, as the January US Consumer Price Index (CPI) is expected at 2.9% YoY, from 3.4%. Core CPI is foreseen at 3.7%, down from 3.9&.

It should be said that Monday’s US calendar revealed a New York Federal Reserve poll on consumer inflation expectations, which came at 3% for one year and 2.5% for five years, unchanged compared to December’s.

Given the backdrop, if inflation continues to fall, that would be negative for the US Dollar, as investors could price in a Fed rate cut sooner rather than later. This follows Fed Chair Powell’s remarks that they could commence easing policy before inflation gets to 2%.

In the meantime, the Reserve Bank of Australia (RBA) Economist Marion Kohler expressed that inflation is still too high, adding that it will take some time to get to its target. She added that services inflation remains high and expects economic growth to remain subdued in the near term.

Data-wise, the Aussie’s economic calendar will feature the Westpac Consumer Confidence poll, along with NAB Business Confidence. On the US front, inflation figures are widely expected.

AUD/USD Price Analysis: Technical outlook

After diving below the 100-day moving average (DMA), the AUD/USD remains neutral to downward biased, supported by buyers keeping the exchange rate above 0.6500. If sellers break below that level, the next support would be February 5 at 0.6468, followed by the psychological 0.6400 level. On the other hand, if buyers reclaim the 100-DMA at 0.6536, that could open the door to challenging the 200-DMA at 0.6568, followed by the 0.6600 mark.