- US wholesale inflation rose 0.6% in February.
- Investors have scaled back bets for a Fed rate cut in June.
- The RBA will likely hold rates at next week’s meeting.
The AUD/USD price analysis paints a bearish picture on Friday amidst the dollar’s continued surge following a significant spike in US wholesale inflation. Meanwhile, a Reuters poll of economists revealed that the RBA will likely hold rates at next week’s meeting.
The dollar surged on Thursday after the US released the Producer Price Index (PPI) report. Wholesale inflation rose 0.6% in February, according to estimates for a 0.3% increase. There are fears that US inflation is picking up as consumer prices also rose more than expected.
Consequently, investors have scaled back bets for a rate cut in June. However, there is a lot of uncertainty in the market. Notably, the economy is showing signs of slowing down. Retail sales missed forecasts, showing there was weaker consumer spending. Meanwhile, unemployment in the US jumped in February, showing a weaker labor market.
With inflation high and the economy slowing down, markets will wait for guidance from Fed policymakers on rate cuts. This might come next week, when the central bank will make its policy decision. The outcome of the meeting will likely be a hold on interest rates.
Meanwhile, in Australia, there is no clear outlook on rate cuts as the RBA has remained hawkish. While the Fed might start cutting rates in June, economists expect the first RBA cut in September. However, there is still no clear majority. Still, markets believe the central bank is done with hikes and will hold rates on Tuesday.
AUD/USD key events today
- US Empire State Manufacturing Index
- US consumer sentiment
AUD/USD technical price analysis: Plunges as 0.6600 level gives way
On the charts, AUD/USD is in freefall after breaking below the 30-SMA and the 0.6600 key support level. The price has fallen far below the 30-SMA, showing a steep decline. At the same time, the RSI is nearly oversold, a sign that bearish momentum is strong.
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The price reversed when it failed to go beyond the 0.6650 key level. Moreover, there was a big doji candle at the level showing indecision. The price made a strong bearish candle after the doji, showing bears were ready to take over. Therefore, the decline will likely reach the 0.6500 key support level and the shallow trendline support.
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Saqib Iqbal
