• The AUD/USD exchange rate is falling despite the weakness of the US dollar, and expectations of interest rate cuts in the US are rising rapidly.
• Comments from a Federal Reserve insider suggest the Fed’s decision next week will be hard to make, raising the likelihood of a 50 basis point rate cut to nearly 50%.
• RBA Governor Bullock remains hawkish and says it is too early to consider cutting interest rates due to high inflation.

The AUD/USD rate fell 0.20% to 0.6710 in Friday’s session. The Australian dollar fell while the US dollar weakened following comments from the ‘Fed whisperer’ suggesting a 50 basis point rate cut at the next Federal Reserve (Fed) meeting was more likely. Meanwhile, the Reserve Bank of Australia (RBA) remained hawkish, providing support for the Australian dollar.

Australia’s economic outlook remains uncertain, with the Reserve Bank of Australia (RBA) maintaining a cautious approach due to high inflation. As a result, financial markets are only forecasting a modest 0.25% rate cut in 2024, reflecting a shift from earlier expectations for more significant easing. This cautious approach highlights the RBA’s concerns about inflation and its commitment to controlling price pressures while balancing the need for economic growth.

Daily Market Factors Review: Australian Dollar Falls, Dovish Fed Limits Downside

• U.S. Treasury yields fell sharply across the Treasury yield curve after the Wall Street Journal published a report suggesting a 50 basis point cut is possible at the FOMC meeting next week.
• The CME FedWatch tool shows markets are fully pricing in a 25 basis point rate cut at next week’s meeting, with the probability of a 50 basis point cut standing at 41%.
• Nick Timiraos, a Wall Street Journal reporter known for his close ties to the Federal Reserve, suggested that next week’s decision could be hard to make.
• On the other hand, RBA Governor Michele Bullock has remained hawkish, saying last week it was too early to consider cutting interest rates because inflation remains too high.

AUD/USD Technical Outlook: The pair is showing mixed momentum, encountering resistance at the 20-day SMA

The pair fell 0.20% in Friday’s session, snapping a 2-day winning streak. The Relative Strength Index (RSI) suggests that buying pressure is fading as it fell to 51, while the Moving Average Convergence and Divergence (MACD) histogram is flat and red, suggesting that selling pressure is ongoing. The overall outlook is mixed, with the pair likely to continue trading sideways in the near term. Support levels can be identified at 0.6650, 0.6600, and 0.6550, while round-robin resistance levels can be found at 0.6735 (20-day SMA), 0.6750, and 0.6800.