After the big fall from February to early March, AUD/USD has largely been consolidating between 0.6600 to 0.6800 as seen above. Any semblance of upside momentum had been stalled by both the 100 (red line) and 200-day (blue line) moving averages, before the added turn lower this week.
The drop yesterday saw price get stuck in around daily support from the 24 March low at 0.6625 but we are now seeing price break below that to fresh six-week lows.
This comes after the Australian CPI data here, which pretty much affords the RBA some breathing room to keep its cash rate unchanged after having paused its tightening cycle earlier this month.
The trimmed mean reading missed on estimates, coming in 6.6% year-on-year (previously 6.9%) and while that is still way above the RBA target band of 2% to 3%, it is a welcome development.
At this point, it might be tough to argue for an upside return for the aussie as the data vindicates the latest central bank outlook. The softer risk backdrop is one thing already working against the currency and now we might also see an added divergence in terms of interest rates between the aussie and the dollar.
Once the Fed announces a rate hike next week, that will lead to the biggest gap between the Fed funds rate and the RBA cash rate in favour of the dollar. How the times have changed.
Going back to AUD/USD, watch out for the supportive layer around 0.6563-85 next. If that gives way, it will be a quick dive towards 0.6500 as sellers push their agenda.
