Australian dollar slides on softer than expected inflation

Aussie dollar fell nearly 0.5% on Wednesday morning, following softer than expected Australian CPI data (Q2 3.9% from Q1 / forecast 4.1% and monthly indicator Jun 3.8% vs May / forecast 4.0%) that almost sidelined expectations for rate hikes this year.

However, better than expected inflation numbers across the western economies came as a result of recent US/Iran ceasefire, with renewed hostilities likely to revive inflationary pressures and change the current rate outlook.

The pair’s price fell to the lowest levels in nearly two weeks on Wednesday, marking over 50% retracement of 0.6865/0.7026 recovery leg, adding to developing negative signals.

Weakening technical picture on daily chart (south heading RSI at 42 and 14- momentum hitting the centreline) support fresh bears, with daily close below 50% retracement (0.6945) to confirm signal and keep focus at the downside, though bears are expected to remain in play while the price stays below former range floor (0.6965) reinforced by 20DMA.

Firm break of 0.6945 to expose targets at 0.6926 (Fibo 61.8%) and 0.6900 zone (Fibo 76.4% / 200DMA).

All eyes are on tonight’s FOMC policy announcement, with the US central bank widely expected to keep rates unchanged, but Fed’s stance on near term policy action will be closely monitored.

Res: 0.6965; 0.6981; 0.7000; 0.7011
Sup: 0.6926; 0.6911; 0.6900; 0.6881