AUD/USD trades near the lows around 0.6745-50 currently
The aussie gained earlier in Asia Pacific trading after the Australian Q4 CPI report showed inflation keeping more steady, resulting in markets paring back expectations of a RBA rate cut next week to ~10%.
But with expectations already that low, it is hard to see the currency gaining further ground unless the situation surrounding the RBA looks set to change.
As mentioned at the time, despite inflation keeping more steady, it isn't going to make the RBA any less dovish on 4 February. Inflation continues to sit under their target band of 2-3% and has been that way since 2016, in spite of rate cuts carried out last year.
As such, the RBA is likely not going to cut next week but there's still high odds of them needing to do so in either March or April next given the state of the economy.
For now, the focus of the aussie turns back to risk and so far major currencies are adopting a similar theme to the bond market i.e. slightly more risk averse.
That is keeping the likes of the aussie, loonie and kiwi pressured with AUD/USD easing just below key daily support around 0.6754 now.
That was the level that helped buyers recover into the close yesterday after a fall to 0.6737.
As we look towards North American trading, those two levels will remain key for AUD/USD and a break below that will open up a slippery slope towards testing support near 0.6700.
The lows last year were seen around 0.6671-90 and that will be a key region to keep an eye on in case we do see an extended downside move in the pair.
Expect a close below 0.6700 to bring about more weakness in the pair, as that will mark the first daily close below that particular figure level since 2009.
