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• Australian Dollar’s downside is limited by the hawkish RBA outlook.
• Market delays expectation for RBA interest rate cuts to February 2025.
• May’s CPI figures will be key for markets to place their bets on the next RBA moves.

Monday's session noted a recovery in the Australian Dollar (AUD) and the AUD/USD found support at the 0.6640 threshold, where the 20-day Simple Moving Average (SMA) converges. The highlight will be Australian inflation data eyed to shape ensuing RBA decisions.

In Australia, despite noticeable frailties in the economy, stubborn inflation continues to clog the Reserve Bank of Australia's (RBA) road to potential interest rate cuts, thus setting a possible limit to the downside pressure on the Aussie. The RBA is now placed among the last G10 nations' central banks to initiate rate cuts, with this stance expected to bolster the Australian Dollar's upcoming gains.
 

Daily Digest Market Movers: Aussie up ahead of key May CPI

• Investors are now eagerly waiting for Wednesday's release of the May Consumer Price Index (CPI) data, expecting the headline inflation to sneak up two points to reach a five-month high of 3.8% YoY.
• The swaps market hints at virtually no rate cuts in 2024 and around 70% odds of the first cut in February 2025, hinting at the RBA's hawkish approach toward tackling inflation.
• Last week, Governor Bullock uncovered the RBA's inclination and sent the markets a clear message of resilience in the face of inflationary pressures. The Board's insistence that "inflation remains above target and is proving persistent" and its expectation that it "will be some time yet before inflation is sustainably in the target range", further asserts the central bank's tough stance.
• As the RBA doesn’t consider rate cuts, the Aussie’s downside is limited.
   

Technical analysis: AUD/USD recovers, buyers defend 20-day SMA

On the technical front, flat movements are noted as the Relative Strength Index (RSI) remains above 50 but flattened. Simultaneously, the Moving Average Convergence Divergence (MACD) lingers in negative territory with steady red bars. The upcoming sessions hinge on the buyers maintaining the AUD/USD pair above the 20-day Simple Moving Average (SMA), whose strong defense is currently casting a positive light on the pair’s future outlook.

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