Australian Dollar Forecast: Will AUD/USD Break Below $0.67 with Inflation in Focus?

Consumer Inflation Expectations Under the Spotlight

Consumer inflation expectations will likely influence the AUD/USD and sentiment toward the RBA rate path on Thursday, October 10. Economists forecast consumer inflation expectations to slip from 4.4% in September to 4.3% in October.

Lower-than-expected inflation expectations could impact consumer spending, possibly dampening inflation. Consumers delay purchases if they anticipate falling prices. Expectations of weaker consumer spending and softer inflation may raise investor bets on a Q4 2024 RBA rate cut. A more dovish RBA rate path could drive the AUD/USD below $0.67.

The RBA and the Aussie Dollar

At September’s RBA press conference, RBA Governor Michele Bullock noted:

“Weaker than expected momentum in H1 2024 suggests there is some risk that consumption could remain more subdued than expected.”

With private consumption accounting for over 50% of Australia’s GDP, weaker spending may also impact the Aussie economy. Risks to the economy may pressure the RBA further to cut rates to bolster growth.

Beyond the data, RBA Chief Economist Sarah Hunter is on the calendar to speak today. Insights into the inflation outlook, the labor market, and timelines for a possible rate cut could move the dial.

How Can the US CPI Report Impact the US Dollar?

Turning to the US session, the highly anticipated US CPI Report will spotlight the US dollar and the Fed. Economists forecast the US annual inflation rate to drop from 2.5% in August to 2.3% in September.

A lower-than-expected print may strengthen bets on a 25-basis point November Fed rate cut, supporting an AUD/USD move toward $0.68. Conversely, hotter-than-expected inflation could dampen hopes for a November Fed rate cut, possibly driving the AUD/USD down to $0.66500.

Other economic indicators include the weekly jobless claims data. However, investors may brush the data aside unless claims unexpectedly spike.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends will likely hinge on central bank speeches and inflation figures from Australia and the US. The US CPI Report will likely be the key driver for the AUD/USD pair, with falling bets on a Fed rate cut possibly sending the AUD/USD toward $0.66500.

Investors should closely monitor central bank signals and economic indicators, which could influence AUD/USD trends. Beyond the economic calendar, news updates on the Middle East conflict also need monitoring. Risk aversion could trigger a flight to safety, affecting demand for commodity currencies, including the Aussie dollar.

AUD/USD Technical Analysis

Daily Chart: AUD/USD Breakout Intact

The AUD/USD remains below the 50-day EMA while holding above the 200-day EMA, affirming bearish near-term but bullish longer-term price signals.

A breakout from the 50-day EMA could give the bulls a run at the $0.68006 resistance level. Furthermore, a break above the $0.68006 resistance level may bring the $0.68500 level into play.

Traders should consider the central bank commentary and inflation data from Australia and the US, which may influence AUD/USD price movements.

Conversely, an AUD/USD break below the $0.67050 support level could bring the 200-day EMA into play.

With a 14-period Daily RSI reading of 41.13, the Aussie dollar may fall to the 200-day EMA before entering oversold territory.