Aussie cuts losses, could still hit lower lows

AUD/USD Current Price: 0.6662

• US CPI was broadly in line with expectations in August.
• Australia will publish Consumer Inflation Expectations for September on Thursday.
• AUD/USD recovers from intraday lows, still exposed to downside risk.

AUD/USD spent the first half of the day consolidating near 0.6640, the weekly low, amid the absence of relevant data. The US dollar lost ground amid strength in the Japanese yen (JPY), which rose to a fresh 2024 high against its US rival, however Aussie gains were capped by comments from Reserve Bank of Australia (RBA) deputy governor Sarah Hunter . Hunter said officials were surprised by the “limited” easing this year in some key employment indicators, noting that the labor market is still “tight relative to full employment.” Her words aligned with the RBA’s hawkish stance, with no rate cut in the Asian country.

AUD/USD finally eased after the release of the United States (US) Consumer Price Index (CPI) as the numbers dampened hopes for a 50 basis point (bps) Federal Reserve (Fed) interest rate cut ) at the central bank meeting next week. . The CPI figures were broadly in line with expectations, but the annual core CPI rose 0.3%, beating expectations and the previous reading of 0.2%. Financial markets turned risk-averse and AUD/USD fell to a fresh September low of 0.6621 as Wall Street fell.

However, the pair managed to pare losses as US indices bounced back and heads into the Asian open, trading above the 0.6650 mark. This Thursday, Australia will issue September consumer inflation expectations, previously at 4.5%. Later in the day, the US will release initial jobless claims for the week ended September 6 and the Producer Price Index (PPI) for August.

AUD/USD Short-Term Technical Outlook

Technically, the AUD/USD pair is still exposed to downside risk. The pair made a lower daily low and a lower high, while the same chart shows that the pair flirted with a fixed simple moving average (SMA) of 200. At the same time, the pair fell well below the 20 SMA, a sign that stays in control. Finally, technical indicators have lost their directional power but are consolidating in negative levels. The bear case could be rejected on a sustained bounce above the 0.6710 price area.

In the short-term, and in line with the 4-hour chart, AUD/USD offers a neutral to bearish stance. The pair is barely holding above a flat 200 SMA, while the 20-declining SMA limits advance a few pips above the longer one. If the SMA 20 extends its slide, the risk of a downward extension would increase. At the same time, technical indicators became flat. The Momentum indicator is hovering around the 100 line, while the Relative Strength Index (RSI) indicator is consolidating around 42, which declines risk to the downside.

Support levels: 0.6620 0.6590 0.6550

Resistance levels: 0.6675 0.6710 0.6745