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  • Australia’s Q1 CPI arrives at 0.0% q/q, misses estimates
  • A dead cat bounce amid increased odds of a May RBA rate cut?
  • US dollar eases-off 22-month tops, a quiet US docket ahead.

The Aussie bulls were rescued by the early March support area near 0.7025 region that allowed the AUD/USD pair to attempt a steady recovery back towards the midpoint of the 0.70 handle in the European session.

Broad US dollar retreat from 22-month highs combined with a rebound in gold and copper prices appear to lend some support to the commodity currency. The greenback takes a breather across the board, as the sentiment remains weighed down by heavy selling seen in the Treasury yields and weaker US equity futures.

However, the reprieve for the Aussie looks short-lived, as the odds of a Reserve Bank of Australia (RBA) rate cut as soon as on May 7th have intensified after the Australian Q1 CPI figures fell short of market expectations.

The minutes of the RBA April monetary meeting showed that “members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances.”

In light of the above quote, markets are pricing-in a May rate cut, justified by the inflation report that arrived softer while the Aussie job market remains stronger.

Looking ahead, the Aussie remains vulnerable and break below the 0.7026 level, the bears are likely to eye the 0.7000 next downside target should the risk sentiment sour and bolster the safe-haven demand for the US currency.

AUD/USD Technical Levels