• AUD/USD outlook gains after Fed Chair Jerome Powell’s dovish Jackson Hole remarks boosted rate cut bets for September.
• RBA remains cautious despite strong labor market data, with investors awaiting minutes and CPI for further policy clues.
• US Core PCE inflation later this week is the key risk event that could cap upside momentum in AUD/USD.

The Australian dollar found a strong dip-buying interest last week, closing with the best daily performance in the previous three months. Fed Chair Powell’s dovish tone at the Jackson Hole Symposium highlighted a curious balance in the jobs market as unemployment is on the rise with slowing demand. It signaled a green light for the rate cut.

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According to the CME FedWatch tool, the market participants are now anticipating an 87% probability of a 25 bps rate cut in the September meeting. This recalibration of Fed expectations has weighed on the US dollar, lending room to the Aussie bulls to recover from multi-month lows.

Meanwhile, the RBA’s dovish stance is unlikely to match the Fed, as Australia’s jobs report showed resilience with unemployment dipping to 4.2% and a surge of over 60k full-time positions. This occurred despite a 25 bps cut by the RBA. Moreover, consumer sentiment also remained firm, suggesting the RBA will stay cautious and data-dependent with a gradual easing cycle.

Key Events to Watch

There’s no major event due today with low volume trading as the week begins. Later this week, the spotlight will be on the US Core PCE due on Friday. With US Core CPI at 3.1%, a hotter PCE figure could dampen December rate cut odds, resulting in a stronger dollar and limiting the Aussie rallies.

On the other hand, Australia’s monthly CPI data and RBA meeting minutes will be key to watch as traders will be looking for clues about future policy moves.

AUD/USD technical outlook: Bulls looking to test 200-MA

The 4-hour chart for the AUD/USD price shows a double bottom pattern near 0.6420, which signals a bullish reversal. The pair has managed to reclaim the confluence of key MAs (50 and 100) around 0.6485. The next resistance emerges around the 200-period MA at 0.6510.

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The RSI is also trending higher, above the 50.0 mark but under the overbought area, which suggests further room for the bulls. As long as the price stays above the 0.6420 support, the pair will likely maintain the bullish tone.

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