AUD/USD climbed into the 0.6550 region on Friday, extending its rally as softer US Dollar (USD) flows followed the latest inflation report. The Australian Dollar (AUD) notched a fourth consecutive daily gain against the Greenback, pushing the pair toward the upper boundary of a technical range that has capped price action for much of 2023.
US inflation pressures continue to build
The US Personal Consumption Expenditures (PCE) Price Index advanced again in the year to June, with core PCE hitting 2.9% year-over-year. This marks the third straight month that inflation has edged away from, or at least stalled short of, the Federal Reserve’s (Fed) 2% target.
Despite persistent price pressures, traders continue to bet heavily on a Fed rate cut in September. According to CME FedWatch Tool, markets are pricing nearly 90% odds of a 25-basis-point reduction at the September 17 Federal Open Market Committee (FOMC) meeting. Next week’s US employment report could prove decisive in shaping those expectations.
AUD/USD price outlook
From its recent swing low near 0.6415, AUD/USD has gained more than 2% in less than two weeks, advancing in five of the last seven sessions. While near-term momentum remains bullish, the pair is still confined within a broader consolidation zone between 0.6400 and 0.6600.
Without a significant shift in market sentiment or macro fundamentals, AUD/USD is likely to keep oscillating around its 200-day Exponential Moving Average (EMA) near 0.6480, which continues to act as a magnet for price action.
