- Inflation in Australia eased to an over 3-year low in the third quarter.
- RBA rate cut bets fell to reflect a 24% likelihood of a cut in December.
- US consumer confidence rose more than expected.
The AUD/USD price analysis supports a downtrend as easing price pressures in Australia put downward pressure on the Aussie. However, market participants pushed back bets for a rate cut due to high core and services inflation. Meanwhile, the dollar remained steady after a mixed bag of economic figures.
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Inflation in Australia eased to an over 3-year low in the third quarter mainly due to government subsidies on electricity. The CPI increased by 0.2%, missing forecasts of a 0.3% increase. This caused an initial drop in the Australian dollar.
However, when traders had time to digest the report, it became clear that the main figures showed still-high inflation. Notably, the core CPI increased by 0.8%, above forecasts of 0.7%. Meanwhile, services inflation rose by 4.6% after a 4.5% increase in the previous quarter. The Reserve Bank of Australia pays close attention to these numbers.
Therefore, policymakers might remain cautious about rate cuts. Meanwhile, market bets fell to reflect a 24% likelihood of a cut in December and a 44% chance of a cut in February next year. Market participants are only fully pricing the first move in April.
On the other hand, the dollar remained firm after data revealed that consumer confidence rose more than expected. The CB consumer confidence rose to 108.7, well above estimates of 99.5. However, a separate report showed that job vacancies in the US fell to 7.44 million, missing forecasts of 7.98 million. The drop indicated a drop in demand for labor that solidified bets for a Fed rate cut in November.
AUD/USD key events today
- US ADP nonfarm employment change
- US advance GDP q/q
AUD/USD technical price analysis: Downtrend eyes 0.6501 support level
On the technical side, the AUD/USD price is on a solid downtrend, with the price below the 30-SMA and the RSI near the oversold region. The price recently broke below the 0.6600 support level to make new lows in the downtrend.
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Given the solid bearish bias, AUD/USD might soon reach the 0.6501 support level. Moreover, the downtrend will continue as long as the price stays below the SMA and the RSI trades in bearish territory below 50.
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