AUD/USD Price Analysis: Aussie Slides on Softer Inflation

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  • Australia’s inflation missed forecasts, staying at a two-year low of 3.4% in January.
  • There is a 60% chance that the RBA will cut rates in August.
  • Data on Tuesday revealed a significant drop in US core durable goods orders.

Wednesday’s AUD/USD price analysis revealed a bearish tilt, with the Aussie witnessing a decline after releasing softer-than-anticipated inflation data. At the same time, the dollar was weak after poor economic data indicated a slowdown in the US economy.

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Australia’s inflation missed forecasts, staying at a two-year low of 3.4% in January. Meanwhile, economists had expected the figure to rise to 3.6%. This is good news for the RBA, which has been fighting to tame inflation. Moreover, it raises doubts in the market that the RBA will hike again.

Investors are now keen to see the February inflation figures showing the state of services inflation in the country. The RBA pays close attention to services inflation because it has been the toughest to lower. Still, investors are more confident the RBA rate hiking cycle is done. Moreover, there is a 60% chance that the RBA will cut rates in August.

Elsewhere, a Reuters poll revealed that there will be a 5.0% increase in Australian home prices in 2024.

Meanwhile, the dollar was weaker after data on Tuesday revealed a significant drop in US core durable goods orders in January. Additionally, a separate report showed a decline in consumer confidence. Consumers in the US are worried as the country heads into the election period. 

The next major report in the US is the core PCE price index. This will show the state of inflation, giving clues on the outlook for Fed rate cuts. Economists expect an increase of 0.4% in the figure.

AUD/USD key events today

AUD/USD technical price analysis: Bearish sentiment strengthens below 30-SMA

AUD/USD technical price analysis
AUD/USD 4-hour chart

On the technical side, the bias for AUD/USD is bearish. There was a recent shift in sentiment to bearish when the price broke below the 30-SMA support. Furthermore, the price confirmed this new direction when it retested the SMA as resistance and made a lower low. 

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At the moment, the price is approaching the 0.618 critical Fib level. If this level acts as support, it could lead to a pause in the decline. However, given the solid bearish bias, the price will likely break below to retest the 0.6450 support level.

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