AUD/USD Price Analysis: Corrects mildly from 0.6800

• AUD/USD drops from 0.6800 with Aussie inflation under the spotlight.
• The Fed seems prepared to begin reducing interest rates from September.
• The near-term outlook of the US Dollar remains weak.

The AUD/USD pair falls from the monthly high of 0.6800 in Monday's American session. The Aussie asset drops as the US Dollar (USD) edges higher. While the near-term outlook of the US Dollar remains vulnerable as the Federal Reserve (Fed) is widely anticipated to start reducing interest rates from the September meeting.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, rises slightly to near 100.90 from the annual low of 100.53.

While the Fed seems certain to cut interest rates in September, traders remain split over the likely size. According to the CME FedWatch tool, 30-day Federal Funds futures pricing data shows that the likelihood of a 50-basis point (bps) interest-rate reduction is 36.5%, while rest of the bets are in favor of a 25-bps rate cut.

Meanwhile, the Australian Dollar (AUD) will be influenced by the monthly Consumer Price Index (CPI) data for July, which will be published on Wednesday. Economists estimated that price pressures declined sharply to 3.4% from 3.8% in June. An expected decline in the inflation data would bring expectations of interest rate cuts to the table.

AUD/USD trades close to the monthly high of 0.6800 on a daily timeframe. The near-term outlook of the Aussie asset remains firm as the 10-day Moving Average (EMA) near 0.6700 is sloping higher. The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum.

For a fresh upside, a decisive move above the round-level resistance of 0.6800 will push the asset higher to 0.6840, the higher level seen this year. A breach of the latter would drive the asset towards December 2023 high of 0.6870.

In an alternate scenario, a downside move below August 19 low of 0.6660 will expose the asset to June 28 low of 0.6620 and June 17 low of 0.6585.

AUD/USD daily chart