The Australian dollar experienced a renewed downward trend in the AUD – USD Forecast, reaching a three-week low in early Wednesday trading, as the latest inflation data fell well below expectations. The significant drop in Australian inflation, with May figures at 5.6% compared to a forecast of 6.1% (April recorded 6.8%), reduces the likelihood of another rate hike in the upcoming policy meeting. Consequently, this has made the Australian dollars less attractive to investors.
The recent weakness in the AUD/USD exchange rate confirmed a bearish signal as it breached the 200-day moving average and key support levels at 0.6626 (61.8% Fibonacci retracement of the 0.6458-0.6899 range) and the weekly cloud base. Although daily studies indicate oversold conditions, any consolidation is expected to remain limited below the 200-day moving average (0.6690), keeping the bears in control. The AUD – USD forecast now shifts to a potential final break of the 0.6626 pivots, leading to a further bearish continuation towards 0.6562 (76.4% Fibonacci retracement) and the round-figure support at 0.6500.
AUD/USD Price Action and Technical Indicators
During the morning session, the 1 AUD to USD pair recorded a minor decline of 0.06%, settling at $0.66822. Price action displayed a mixed start, with the pair reaching an early high of $0.66875 before retracing to a low of $0.66797. Looking at the 4-hourly chart and exponential moving averages (EMAs), bearish signals are evident. The AUD/USD remains below the 200-day EMA at $0.67051, while the 50-day EMA converges towards the 100-day EMA, providing further bearish indications.
A break above the 200-day EMA would suggest a potential rally toward the 100-day EMA and the 50-day EMA. Conversely, failure to surpass the 200-day EMA would maintain the focus on the S1 support level at $0.6662. A move beyond the 50-day EMA would signal a bullish turn.
Impact of US Session and Fed Chair Powell
With no major US economic indicators scheduled for release during the session, market participants will closely follow the remarks of Federal Reserve Chair Jerome Powell for guidance. Notably, the probability of a 25-basis point interest rate hike by the Fed in July remains elevated at 76.9%, according to the CME FedWatch Tool, indicating confidence in an upcoming rate increase despite challenges in the manufacturing sector. Furthermore, the chances of a rate hike to 5.75% by September have risen to 15.4%, up from 10.4% on Monday, reflecting growing expectations in the market.
