Despite constant trade war and traditional economic headlines, AUD/USD has been trapped in a tight consolidation range between 0.7300 and 0.7500 for nearly two full months now. This consolidation has taken place within the context of a longer-term downtrend off the high set in early January; the prolonged rangebound trade has resulted in a correction through time rather than the more traditional price correction.
In any event, Aussie’s sideways price action has taken rates from the bottom to the top of the established bearish channel. Whether this price action represents a mere pause in the longer-term bearish trend or a bottoming pattern may well be determined by the end of next week.
On the economic front, Tuesday’s RBA meeting is unlikely to bring any serious fireworks with the central bank potentially on hold for another full year before it feels comfortable raising rates. That said, any changes to the statement that shed light on how RBA policymakers feel the Australian economy is developing could have a short-term impact on the currency.
Likewise, Friday’s US CPI report could have an impact on the pair as well. The Federal Reserve is almost certain to raise interest rates next month regardless of how inflation prints, a sustained decline or increase in inflation pressures could still impact the odds of another rate hike in December.
In AUD/USD, a bullish break above 0.7500 could open the door for a retest of the early June highs near 0.7650, while a bearish break could expose 0.7150-0.7200 next.