Aussie Dollar slips below 0.70 as Bullock dovishness trumps soft PCE

• AUD/USD retreats despite softer US inflation trimming Fed hike bets.
• Bullock signals further RBA tightening may not be necessary.
• ANZ still sees November hike risk after sticky trimmed inflation.

The Aussie Dollar posted losses of 0.57% against the US Dollar on Wednesday, even though US data trimmed hawkish bets on the Federal Reserve, while the dovish tilt of RBA’s Governor Michele Bullock weighed on the antipodean. At the time of writing, the AUD/USD trades at 0.6947 after peaking at 0.6995.

AUD/USD falls as RBA caution outweighs reduced Fed tightening expectations

The US Personal Consumption Expenditure (PCE) Price Index in August was 3.4% YoY, below estimates of 3.7% and unchanged from July’s print. At the same time, the Core PCE, which excludes volatile items and is sought by the Fed as a preferred measure of inflation, increased was unchanged at 3% YoY, below estimates of 3.3%.

Other data showed that US GDP in Q2 rose from 1.5% QoQ, as expected, to 2.2% QoQ, exceeding estimates and indicating that the economy remains resilient.

US inflation data trimmed hawkish bets on a Fed rate hike in October. A day ago, money markets saw a more than 60% chance of a 25 bps increase, but as of writing, they now see a 61% chance of a hold, per Prime Terminal data.

Despite this, the AUD/USD edged lower in response to RBA’s Bullock saying, “no further rate hikes may be needed if inflation declines.” Australia’s inflation data showed that the Trimmed Mean CPI rose to 3.6% YoY, unchanged, as expected by economists.

ANZ analysts at a note, wrote that “the August CPI is consistent with our existing forecast for Q3 trimmed mean inflation to come in at 1.0% q/q,” and that they see another rate hike by the RBA.

Their reasoning is that “We’d view such a quarterly number as being a material upside surprise relative to the forecasts in the RBA’s August Statement on Monetary Policy. So we still think another rate hike at the November meeting, taking the cash rate to 4.85%, is more likely than not. Governor Bullock did say in the press conference following the September meeting that the Q3 data would only tell them about the past, and that any further tightening would be about the future.”

Up next, the Aussie economic docket will feature the release of the August Trade Balance, along with the Financial Stability Review. In the US, traders are looking for Fed speaking, jobless claims and Friday’s Nonfarm Payrolls.

AUD/USD Price Forecast: Technical outlook

In the daily chart, AUD/USD trades at 0.6946, extending a bearish near-term bias as spot holds below the simple moving average triple around 0.7092 and a series of upward-sloping support trend lines whose break levels now act as resistance. The Relative Strength Index (14) has slipped toward oversold territory near 27, which hints at stretched downside momentum but does not yet challenge the broader pressure created by the overhead moving average cluster and the descending long-term trend line originating near 0.8015.

On the topside, initial resistance is seen at the upward trend-line break around 0.7051, followed by the composite simple moving average cluster near 0.7092 and then the horizontal barrier at 0.7198, with higher resistance levels aligning at the former support trend-line breaks around 0.7398, 0.8763 and 0.9638. On the downside, immediate support is offered by the latest upward-sloping trend line with a break level near 0.6909, and a daily close below this area would reinforce the bearish structure, exposing further weakness while rallies remain capped beneath the cited resistance band.

(The technical analysis of this story was written with the help of an AI tool. Know more.)