The AUD/USD outlook points south as the dollar holds firm ahead of US consumer inflation data and the FOMC policy meeting. Meanwhile, the Australian dollar was frail after data revealed weaker business conditions in May.

The dollar remained strong after the recent surge in Treasury yields due to better-than-expected job numbers. The US employment report on Friday renewed doubts about a slowdown in the US economy that would allow the Fed to start cutting rates. 

All eyes are now on the Consumer Price Index report and the Fed meeting for more clues on when the Fed might start lowering interest rates. Inflation forecasts show the headline figure easing to 0.1% from 0.3% the previous month. 

The inflation report will determine the tone policymakers will adopt at the FOMC meeting. A higher number will reduce policymakers’ confidence that inflation will reach the 2% target, leading to a hawkish stance. On the other hand, a slower inflation rate could allow policymakers to adopt a more dovish stance.

Meanwhile, data from Australia on Tuesday revealed weaker business conditions in May as profits and sales growth declined. However, there were signs that cost pressures were accelerating, creating a mixed picture for the RBA. Nonetheless, investors are only fully pricing in the first RBA rate cut in July next year.

AUD/USD key events today

There are no key events scheduled for today from Australia or the US. Therefore, investors will keep speculating ahead of the US inflation report.

AUD/USD technical outlook: Bears intensify within bearish channel

(Click on image to enlarge)

AUD/USD 4-hour chart

On the technical side, the AUD/USD price is trading well below the 30-SMA, with the RSI in bearish territory below 50. Therefore, the bias is bearish. At the same time, the price trades within a bearish channel, respecting the solid support and resistance. 

The recent decline hit the 0.6580 support level, where the price paused, and bulls took over. However, the bullish move seems a lot weaker than the decline. Therefore, there is a chance it will pause at the 30-SMA, where bears will resume control. If this happens, the price will likely take out the 0.6580 support for a new low.

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