The Australian Dollar strengthened as investors assessed the latest US Consumer Price Index (CPI) figures

On Wednesday, the AUD/USD rose by 0.25% to 0.6670 as markets responded to US inflation data and comments from the Reserve Bank of Australia (RBA). The US Consumer Price Index (CPI) indicated a decrease in the annual rate of inflation, fueling speculation that the Federal Reserve (Fed) might slow its rate hikes.

Amid a complex economic landscape, the RBA's firm stance on combating high inflation has moderated market expectations. With inflation still high, investors now expect a more gradual approach to easing monetary policy, anticipating only a 0.25% rate cut by 2024.

Daily Digest Market Movers: Australian Dollar Rises on US CPI Data and RBA Signals

• The Australian Dollar gained strength following supportive comments from RBA Assistant Governor Sarah Hunter, who reinforced the bank's resistance to near-term policy rate cuts. Hunter highlighted that Australia's labor market remains tight relative to full employment, underscoring the RBA's hawkish stance.
• On the US side, the Consumer Price Index (CPI) fell to 2.5% YoY, below the consensus estimate of 2.7% and down from the previous reading of 2.9%.
• Core CPI, excluding food and energy, increased by 3.2% YoY, in line with market expectations and July’s rise.
• Monthly CPI grew by 0.2%, while core CPI rose by 0.3%, exceeding consensus forecasts.
• In response, money market futures traders have reduced the probability of a 50 basis point Fed rate cut to 15% and raised the likelihood of a 25 basis point cut to 85%.
• Despite its current hawkish stance, the RBA may eventually align with a global easing trend later this year due to weak economic activity and diminished inflation pressures.
• If Fed and RBA policies converge, the Australian Dollar could face further downside.

AUD/USD Technical Outlook: Mixed Signals as Indicators Rebound

The AUD/USD pair is currently displaying a mixed technical outlook based on the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and price action. The RSI is showing a sharp rise, indicating that buying pressure is recovering, though it remains in negative territory. Meanwhile, the MACD is declining and remains in the red, suggesting that selling pressure is weakening.

Resistance is observed at 0.6700, with a potential breakout above this level leading to further gains toward 0.6740. On the downside, support levels are at 0.6660 and 0.6620. A drop below these supports could push the pair down to 0.6600.