- The dollar plunged on Wednesday after softer-than-expected consumer inflation data.
- Fed policymakers projected only one rate cut in 2024.
- Data on Thursday showed a bigger-than-expected increase in Australia’s employment in May.
The AUD/USD forecast shows new bearish sentiment as the dollar recovers after the FOMC policy meeting. Meanwhile, the Australian dollar barely reacted to news that Australia’s labor market remained resilient in May.
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The dollar plunged on Wednesday after softer-than-expected consumer inflation data. The Consumer Price Index was flat in May compared to forecasts of a 0.1% increase. This was the second month of easing inflation, which led to a surge in confidence that the Fed would cut rates in September. Consequently, Treasury yields fell. If the downtrend in inflation is back, policymakers will be in a better position to shift to a more dovish tone.
However, the move soon reversed when Fed officials concluded their policy meeting. Policymakers projected only one rate cut in 2024, compared to market expectations of at least two. Moreover, they noted that the outlook will depend heavily on incoming data. Still, the decline in inflation was a step in the right direction that will pave the way for rate cuts in the US. The outcome of the policy meeting boosted the dollar, which weighed on the Australian dollar.
Meanwhile, data on Thursday showed a bigger-than-expected increase in Australia’s employment in May. The country added 39,700 jobs, well above economists expectations for 30,000. Meanwhile, the unemployment rate fell from 4.1% to 4.0%, showing resilience in the labor market. However, the Australian dollar barely reacted as traders already do not expect RBA rate cuts any time this year. There is less than a 50% chance that the RBA will cut rates in December.
AUD/USD key events today
- US PPI report
- US unemployment claims
AUD/USD technical forecast: Bulls puncture solid resistance
On the technical side, the AUD/USD price made a sharp, bullish move that punctured its channel resistance before it retreated. This is a sign that bulls are gaining momentum and might soon break out of the bearish channel.
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Notably, the price sits above the 30-SMA while the RSI is above 50, supporting solid bullish momentum. Although it is back inside the channel, bulls might soon retest the channel resistance and the 0.6680 resistance level. A break above these levels would allow the price to retest the 0.6720 resistance.
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