AUD/USD Outlook: RBA vows to fight inflation

• The RBA kept rates on hold on Tuesday and reiterated its commitment to curb stubborn inflation.

• The likelihood of an RBA cut in December rose slightly to 72%.

• PMI data from the previous session revealed steady business activity.

AUD/USD outlook shows bullish reaction to Reserve Bank of Australia policy meeting. The Australian dollar fluctuated after the RBA’s policy meeting as policymakers remained committed to controlling inflation.

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The RBA kept rates on hold on Tuesday and reiterated its commitment to curb stubborn inflation. Due to high inflation, policy makers remained cautious for most of this year. At 3.9 percent, Governor Michele Bullock noted that core inflation remains too high. Therefore, further rate hikes are still possible.

The Australian dollar rose immediately after the meeting before collapsing. The whiplash move showed uncertainty among market participants about the prospects for rate cuts. After the meeting, the probability of a cut in December rose slightly to 72%.

Meanwhile, the US dollar was flat after the previous session’s PMI data highlighted steady business activity. At the same time, it pointed to rising prices that could lead to higher inflation in the future. The report comes after the Federal Reserve cut borrowing costs by 50 basis points. Higher inflation could reduce the likelihood of another massive rate cut in November. Currently, market participants value a near 50% chance of such an outcome. However, things could change as more data emerges.

Market focus will now shift to GDP and core PCE figures. GDP will show the state of the economy, which has performed better than expected. Meanwhile, core PCE is a meaningful measure of inflation for the Fed. It will therefore have an impact on expectations for future political movements.

Key AUD/USD events today

• US CB Consumer Confidence

AUD/USD Technical Outlook: Choppy bullish price action

Technically, the AUD/USD price is in a bullish trend above the 30-SMA. At the same time, the RSI is trading above 50 in bullish territory. The price recently broke above the 0.6800 resistance level. However, the move above the key level was weak. The price rose in a choppy fashion, indicating exhaustion.

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At the same time, the RSI made a bearish divergence, a sign that the bullish momentum is fading. Therefore, it could pull back to retest the 30-SMA. Further, it could break below the SMA and the 0.6800 level to reverse the trend.

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