Australian dollar fell on Friday, fundamentals may limit decline

The AUD/USD pair is degenerating slightly, settling at around 0.6575 on Friday.
RBA confirms its hawkish stance, which contributes to AUD gains.
Investors analyze inflation data from China released during the European session.

The AUD/USD pair declined slightly to 0.6575 during Friday’s session, down a modest 0.30%. However, the Reserve Bank of Australia’s (RBA) continued aggressive policy and stronger inflation data from China could limit the Australian currency’s decline.

Given Australia’s convoluted economic outlook and the RBA’s aggressive stance on the back of high inflation, markets remain priced in just 25 basis points of monetary policy easing in 2024.

Daily Market Factors Review: RBA’s hawkish tone and solid Chinese inflation data could support AUD

The Reserve Bank of Australia held interest rates steady, reiterating that “the board does not rule out any possibility.” Significantly, the bank stressed the importance of remaining vigilant about possible inflation risks, suggesting no immediate policy changes.
On Thursday, RBA Governor Michele Bullock reiterated the need to reduce the urgency of interest rate cuts, adopting a hawkish tone and saying the board would “not hesitate to raise rates if necessary” to tackle persistent inflation.
In terms of data, putting emphasis on Friday’s inflation report, the National Bureau of Statistics announced that China’s consumer prices rose 0.5% year-on-year in July, while a 0.3% boost was forecast.
Additional information showed the CPI rose 0.5% in July, reaching its highest level since February, easing concerns about a deep economic crisis in China.
In this sense, while there is good news coming from Australia, the downside potential for the AUD is narrow.

AUD/USD Technical Outlook: The pair is facing mighty resistance at the SMA convergence near 0.6000

The AUD/USD price action over the past week reflects bulls encountering significant resistance around the 0.6600 level, which coincides with the convergence of the 20,100 and 200-day elementary moving averages (SMA). However, support remains firmly in place at the 0.6500 level.

The Relative Strength Index (RSI) remained stagnant around the neutral zone, hovering around 49, which does not indicate significant buying or selling pressure. The enormous jump from almost 30 to 49 this week suggests that buyers have taken a step towards increasing the driving force.