AUD/USD Forecast: Bulls flirt with 200-day SMA near 0.6600 ahead of US inflation data

• AUD/USD draws support from a combination of factors, albeit lacks bullish conviction.
• The RBA’s hawkish stance continues to act as a tailwind amid subdued USD price action.
• Traders, however, await the key US inflation figures before placing fresh directional bets.

The AUD/USD pair continues with its struggle to conquer a technically significant 200-day Simple Moving Average (SMA) and trades with a mild positive bias around the 0.6600 mark through the early European session on Tuesday. Traders seem reluctant and opt to wait on the sidelines ahead of the closely-watched US consumer inflation figures for cues about the Federal Reserve's (Fed) policy path. Hence, the focus will remain glued to the crucial US Consumer Price Index (CPI) on Wednesday, which, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide a fresh directional impetus to the currency pair. 

In the meantime, traders on Tuesday will look to the US Producer Price Index (PPI) for short-term trading opportunities later during the early North American session. Meanwhile, the markets have fully priced in a 25 basis points (bps) interest rate cut by the Fed in September and see the possibility of a bigger – 50 bps rate cut. This fails to assist the buck to attract any meaningful buying, which, along with the Reserve Bank of Australia's (RBA) hawkish stance, might continue to act as a tailwind for the AUD/USD pair. In fact, RBA Governor Michele Bullock said last week that the central bank will not hesitate to hike rates in the face of more upside risks to inflation. 

Meanwhile, the Australian Bureau of Statistics reported this Tuesday that the Wage Price Index remained elevated and advanced by the 4.1% YoY rate in the three months through June. On a quarterly basis, wages grew at a slightly lower pace than the January-March quarter, by 0.8%. Nevertheless, the data pointed to persistent inflationary pressures in the economy and supports the RBA's view that interest-rate cuts remain some way off. The markets, however, see a 50-50 chance of policy easing in November and have fully priced in a 25 bps rate in December. This, along with rising geopolitical tensions in the Middle East, keeps a lid on the risk-sensitive Australian Dollar (AUD). 

Apart from this, persistent worries about an economic slowdown in China – the world's second-largest economy and Australia's largest trading partner – contribute to capping gains for the AUD/USD pair. Hence, investors this week will also keep a close eye on Chinese macro data – Industrial Production and Retail Sales data – due on Thursday. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bullish traders. That said, the lack of follow-through buying warrants caution before positioning for an extension of the recent strong recovery move from the 0.6350-0.6345 area, or the lowest level since November 2023 touched last week. 

Technical Outlook

From a technical perspective, a sustained strength and acceptance beyond the 200-day SMA hurdle, around the 0.6600 mark, is needed to support prospects for additional gains. Given that oscillators on the daily chart have just started moving in positive territory, the AUD/USD pair might then accelerate the positive move towards the 0.6655 intermediate hurdle en route to the 0.6675-0.6680 region and the 0.6700 mark. The latter coincides with the 78.6% Fibonacci retracement level of the July-August fall, which if cleared decisively should allow spot prices to make a fresh attempt to reclaim the 0.6800 mark for the first time since January. 

On the flip side, the 0.6575-0.6570 area, or the 50% Fibo. level now seems to have emerged as an immediate support. This is followed by support near the 0.6545 horizontal zone, the 38.2% Fibo. level near the 0.6520 region, and the 0.6500 psychological mark. Some follow-through buying will suggest that the latest recovery move from the YTD low has run its course and prompt aggressive technical selling. The subsequent fall has the potential to drag the AUD/USD pair to the 0.6435 intermediate support en route to the 0.6400 mark and last week's swing low, around mid-0.6300s.