AUD/USD Price Analysis: RBA yo Extend Easing Cycle

• The AUD/USD price analysis points to further RBA rate cuts as inflation and growth in Australia slow.

• Market participants are pricing a 34% chance of an RBA cut in September.

• Traders remain cautious ahead of the US CPI report.

The AUD/USD price analysis points to further RBA rate cuts as inflation and growth in Australia slowdown. The RBA cut rates as expected and signaled more to come. Market participants are now waiting for the US consumer inflation report for clues on Fed rate cuts.

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The Australian dollar dropped on Tuesday after the Reserve Bank of Australia lowered borrowing costs by 25-bps. Markets had already priced the move. However, the tone during the meeting showed that policymakers were willing to keep cutting interest rates. 

“Forecasts imply that the cash rate might need to be a bit lower than it is today to keep inflation low and stable and employment growing, but there is still a lot of uncertainty,” said Bullock in a post-meeting decision.

Market participants are pricing a 34% chance of a cut in September. At the same time, they expect two more early next year.

Meanwhile, traders remain cautious ahead of the US CPI report. The last inflation report revealed hotter-than-expected price pressures, which led to a sharp decline in Fed rate cut expectations. Another such reading might have the same effect. However, analysts believe the Fed will still cut in September due to a slowdown in the labor market.

AUD/USD key events today

• US core CPI m/m
• US CPI m/m
• US CPI y/y

AUD/USD technical price analysis: Bears take over by breaking below the SMA

On the technical side, the AUD/USD price has broken below the 0.6500 support and the 30-SMA, indicating a bearish shift in sentiment. The bias has turned bearish with the price now below the 30-SMA and the RSI under 50.

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Initially, bulls had taken the lead by pushing above the 30-SMA. However, they lost enthusiasm after the price broke above the 0.6500 key level. AUD/USD started making small-bodied candlesticks and moving sideways. This loss of enthusiasm allowed bears to return and push the price below the SMA.

If bears can keep the price below the 30-SMA, it will likely drop to retest the 0.6425 support. A break below this level would resume the previous downtrend.

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