Home AUD/USD Outlook: Dollar Firms as US Inflation Report Looms

AUD/USD Outlook: Dollar Firms as US Inflation Report Looms

  • The dollar strengthened ahead of the US consumer inflation report.
  • The Australian dollar was steady after mixed economic reports.
  • A report on consumer confidence in Australia showed a rebound in February.

On Tuesday, the AUD/USD outlook leaned towards bearish territory as the dollar surged in anticipation of the upcoming US inflation report. Meanwhile, the Australian dollar was steady after mixed economic reports.

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The inflation report carries much weight because it greatly impacts the Fed’s policy outlook. Moreover, it will affect market bets for rate cuts. At the moment, experts believe the figure will show a decline in inflation, in line with the recent downtrend. Such an outcome will likely boost rate-cut bets, leading to a decline in the dollar. Consequently, the AUD/USD pair would rally. On the other hand, the pair would plunge if the figure beats forecasts.

In Australia, a report on consumer confidence showed a rebound in February. Consumers are more confident as inflation drops that rates have peaked. As a result, there is more spending in the economy. Australia’s inflation fell to 4.1% in Q4 as high interest rates slowed the economy. Although the RBA has hinted at the possibility of another rate hike, markets believe the next move will be a cut.

Meanwhile, another report revealed softer business conditions in Australia in January. This came from a slowdown in the services sector, which drives a large part of the economy. Despite the slowdown in inflation and the economy, the RBA repeated on Tuesday that inflation was still too high. Therefore, it will take time for it to return to the 2% target.

AUD/USD key events today

  • US Core CPI m/m
  • US CPI m/m
  • US CPI y/y

AUD/USD technical outlook: New bullish momentum faces tough resistance

AUD/USD technical outlook
AUD/USD 4-hour chart

On the technical side, AUD/USD has declined to the 30-SMA support after retesting the 0.6540 resistance level. Initially, the price was in a downtrend, respecting the 30-SMA as resistance until it paused at the 0.6480 support level. At this point, bulls emerged, triggering a break above the 30-SMA resistance. Consequently, there was a shift in sentiment from bearish to bullish. 

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However, the new bullish move has met a strong resistance zone comprising the 0.6540 and 0.5 Fib retracement levels. Bears will resume the downtrend if this zone holds firm. However,  if the price eventually breaks above, it could start a bullish trend.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.