Australian Dollar extends decline as traders brace for US CPI data

• The Australian Dollar remains under selling pressure in Thursday’s Asian session. 
  

• The firmer USD and lack of further China’s stimulus measures drag the pair lower. 
  

• The US CPI inflation data will be in the spotlight on Thursday.
  

The Australian Dollar (AUD) extends its decline on Thursday. The stronger US Dollar (USD) amid rising speculation of a 25 basis points (bps) rate cut by the Federal Reserve (Fed) in November undermines the Aussie. Furthermore, Beijing's attempt to stimulate the world’s second-largest economy disappointed investors as China’s top economic planning authority failed to announce additional measures to improve flagging growth. It’s worth noting that China is a major trading partner to Australia, and concerns about China's sluggish economy tend to have a negative impact on the AUD value.

Investors will closely monitor the key US Consumer Price Index (CPI) inflation data, which is due later on Thursday. The headline US CPI is expected to show an increase of 2.3% YoY in September, while the core CPI inflation is estimated to show a rise of 3.2% YoY in the same report period. However, in case the report shows a softer-than-expected outcome, this could open the door for a jumbo Fed rate cut, which might weigh on the USD and cap the downside for AUD/USD. 

Daily Digest Market Movers: Australian Dollar softens ahead of US CPI data

RBA Minutes from the September meeting showed board members overlooked the warning that there would be no rate cuts in the near future. The Australian central bank wants to keep its options open, watching whether the economy starts to pick up in the second half of the year. 

“This leaves the door open to a shift to neutral by the end of this year and then easing in early 2025. We continue to expect the first cash rate cut in February 2025,” noted ANZ analysts. 

The World Bank forecasted that China’s growth rate will slow to 4.3% in 2025, down from a projected 4.8% this year, in an economic update on Tuesday.

San Francisco Fed President Mary Daly said on Wednesday one or two more rate cuts this year are likely if the economy evolves as she expects, adding that she is now "quite confident" inflation is headed toward the Fed's 2% target.

Boston Fed President Susan Collins said on Wednesday that with inflation trends growing weaker, it is very probable that the Fed can deliver more interest rate reductions. 

The markets have priced in nearly 80% odds of 25 basis points (bps) Fed rate cuts in November, up from 31.1% last week, according to the CME FedWatch Tool. 

Technical Analysis: Australian Dollar remains vulnerable near the key support level

The Australian Dollar weakens on the day. Technically, the bullish outlook of the AUD/USD pair looks vulnerable as the pair hovers around the lower limit of the ascending trend channel and the key 100-day Exponential Moving Average (EMA) on the daily chart. If AUD/USD crosses below the mentioned levels, this could resume its downside. The downward momentum is reinforced by the 14-day Relative Strength Index (RSI) which is located below the midline near 41.20.

The crucial support level for AUD/USD emerges at 0.6700, representing the lower limit of the trend channel, the 100-day EMA and the psychological level. A breach of this level could pave the way to 0.6622, the low of September 11. 

On the other hand, the high of September 6 at 0.6767 acts as an immediate resistance level of the pair. Further north, the next upside barrier is seen at 0.6823, the high of August 29, followed by 0.6942, the high of September 30.