Australian Dollar rises after US CPI, RBA signals

• Australian Dollar is rising against the US Dollar after the latest US inflation data showed a decline in the CPI.
• RBA's Hunter spoke about Australia's labor market, highlighting that it is still tight relative to full employment.
• As the RBA remains hawkish, the AUD/USD pair's upside is open.

The AUD/USD rose by 0.25% to 0.6670 on Wednesday as markets reacted to the release of US inflation data and comments from the Reserve Bank of Australia (RBA). The US Consumer Price Index (CPI) showed a decline in the annual rate of price increases, raising hopes that the Federal Reserve (Fed) may slow the pace of interest rate hikes. 

In the face of a complex economic outlook, the Reserve Bank of Australia's (RBA) aggressive stance against high inflation has tempered market expectations. With inflation remaining elevated, investors now anticipate a more gradual easing of monetary policy, forecasting only a 0.25% interest rate reduction by 2024. 

Daily digest market movers: Australian Dollar gains on US CPI figures and RBA signals 

• RBA Assistant Governor Sarah Hunter's comments supported the RBA's case against near-term policy rate cuts, which boosted the AUD. Hunter commented that the labor market is still tight relative to full employment, which reiterated the bank's hawkish stance.
• On the US side, CPI declined to 2.5% YoY, below the consensus estimate of 2.7% and the previous reading of 2.9%.
• Core CPI, which excludes volatile food and energy prices, rose 3.2% YoY, matching the market expectation and July's increase.
• On a monthly basis, the CPI increased 0.2%, while the core CPI rose above consensus to 0.3%.
• Money market futures traders have slashed the odds for a 50 bps rate cut by the Fed to 15% and increased the probability of a 25 bps cut to 85%.
• Despite its hawkish stance, the RBA is likely to join the global easing cycle later this year due to weak underlying economic activity and lower inflation pressure.
• If the Fed and RBA policies align, the Aussie may see further downside.

AUD/USD technical outlook: Pair faces a mixed outlook while indicators recover

The pair is trading in a mixed outlook, according to the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD) and price action. The RSI is rising sharply, this implies that buying pressure is recovering while it still remains in negative terrain. The MACD is decreasing and red. This generally suggests that selling pressure is losing strength. 

The pair is facing some resistance at 0.6700. A break above this level could lead to further gains toward 0.6740. On the downside, support can be found at 0.6660 and 0.6620. A break below these levels could see the pair falling toward 0.6600.