The AUD/USD outlook leans to further decline as the dollar steadies before pivotal US inflation numbers. In the previous sessions, the greenback rallied as the likelihood of a massive Fed rate cut fell after Friday’s nonfarm payrolls report. 

The AUD/USD pair has slipped to new lows since Friday. The decline came as the dollar soared after a mixed US employment report. Market participants had been waiting for clues on the Fed’s first rate cut size. Notably, job growth slowed while unemployment eased. The report showed that the labor market was gradually easing. Therefore, it indicated no need for a massive rate cut, boosting the dollar. 

The likelihood of a 50 bps September Fed rate cut has fallen from around 50% to 30%. The CPI report might shed more light on the upcoming policy meeting. Analysts believe price pressures have cooled from 2.9% to 2.6% in August. Meanwhile, the monthly figure could hold steady at 0.2%. The CPI report will support a 50 bps rate cut if inflation eases more than expected. On the other hand, if inflation meets forecasts or is slightly higher, bets for a 25 bps rate cut will increase.

Meanwhile, data on Tuesday showed that business conditions in Australia fell by 3 points to +3, a two-and-a-half-year low in August. Although the economy is weak, policymakers maintain a cautious tone, saying inflation remains high. Nevertheless, investors are pricing an 80% chance of an RBA rate cut in December. 

AUD/USD key events today

Investors do not expect any key economic reports from Australia or the US today. Therefore, the pair might consolidate.

AUD/USD technical outlook: Downtrend could test the 0.6600 support

(Click on image to enlarge)

AUD/USD 4-hour chart

On the technical side, the AUD/USD price is on a clear downtrend and has made a new low below the 0.6700 key level. The price sits far below the SMA with the RSI near the oversold region, indicating a strong bearish bias. 

Initially, bears had paused at the 0.6700 support level, allowing the price to retest the 30-SMA. However, price action showed weak bullish momentum. Consequently, the price soon bounced lower with a strong bearish candle. With such solid momentum, the price will likely soon reach the 0.6600 support.

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