The AUD/USD outlook shows a steep downtrend as the Aussie tumbles after the Reserve Bank of Australia meeting minutes. Meanwhile, the dollar held firm as market participants adjusted the outlook for Fed rate cuts. 

The Australian dollar fell on Tuesday after RBA meeting minutes sounded slightly dovish. However, a shift to a completely dovish tone might take longer since policymakers are still concerned about inflation. Moreover, the RBA might not start cutting interest rates until later next year. 

Meanwhile, in the US, traders expect a smaller rate cut in November compared to earlier expectations of another 50-bps rate cut. The outlook shifted after Friday’s nonfarm payrolls report. According to the report, the US economy added an unexpected 254,000 jobs in September. At the same time, the unemployment rate eased slightly to 4.1%. 

A robust labor sector gives the Fed enough room to gradually lower borrowing costs. Even before the employment figures, Fed Chair Powell had struck a hawkish tone, stating that the central bank’s next moves might be small. Currently, markets are pricing an 86% chance of a 25-bps rate cut in November. 

The next major report will show the state of consumer inflation. Economists expect price pressures to ease from 2.5% to 2.3%, inching closer to the Fed’s 2% target. Meanwhile, the monthly figure might increase by 0.1% after a 0.2% increase in the previous month.

AUD/USD key events today

Market participants do not expect any high-impact reports today. Therefore, the pair might extend its downtrend with traders absorbing the shift in the Fed’s policy outlook.

AUD/USD technical outlook: 0.618 Fib break signals bearish momentum

(Click on image to enlarge)

AUD/USD 4-hour chart

On the technical side, the AUD/USD price has broken below the 0.618 Fib retracement level. Therefore, the price might continue lower to the 1 Fib level. The downtrend is steep since the price has traded well below the 30-SMA with no deep pullbacks. 

At the same time, the RSI has consistently lowered and dipped into the oversold region, suggesting solid bearish momentum. Consequently, there is a high chance the downtrend will continue to the 0.6700 support. Here, it might pause for a pullback before making new lows.

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