Aussie the laggard after softer inflation data earlier today

<p>In case you missed the data: <a href="https://www.forexlive.com/news/australian-q4-headline-cpi-41-yy-vs-43-expected-20240131/" target="_blank" rel="follow">Australian Q4 headline CPI 4.1% y/y vs 4.3% expected</a></p><p>This has seen the Australian dollar fall on the day, with AUD/USD down 0.5% to 0.6565 currently. Looking at the report itself, a decline in food price inflation and goods and services were welcome developments. That being said, inflation levels are still very much elevated as a whole.</p><p>So, can we expect the RBA to follow other major central banks and look to rate cuts sooner rather than later this year? Perhaps.</p><p>If the trend stays, there is a good chance for the RBA to take action. As things stand, markets are still pricing in the first rate cut to be for August. However, the odds of a June rate cut are now at ~82%. That is certainly a step up from the squeeze in rates to start the year as seen <a href="https://www.forexlive.com/news/central-bank-rate-cut-odds-where-are-we-at-now-20240110/" target="_blank" rel="follow">here</a> just a few weeks ago.</p><p>Looking over to AUD/USD, the recent price movement shows more of a consolidation phase though. The drop to start the year stalled after running into support from the December low at 0.6525. Since then, we've been seeing price action trade more sideways in and around the 200-day moving average (blue line). Meanwhile, the short-term resistance is seen at around 0.6614-24 currently.</p><p>With risks to the aussie now out of the way, it all comes down to the dollar side of the equation now. And the two key risk factors in trading this week are still the Fed and the US jobs report. That will provide traders with some working potential to chase a breakout from this consolidation phase next.</p>

This article was written by Justin Low at www.forexlive.com.