Struggles for a direction amid sideways US Dollar

• AUD/USD trades back and forth near 0.6420, following the footprints of the sideways US Dollar.
• The Australian Dollar will dance to the tune of the monthly CPI data, which is seen hotter at 5.2% vs. July’s reading of 4.9%.
• The 20-day EMA is overlapping the Aussie asset, indicating a broader sideways trend.

The AUD/USD pair remains inside the woods above the round-level support of 0.6400. The Aussie asset struggles to find a direction as the US Dollar has turned sideways amid uncertainty over the Federal Reserve’s (Fed) interest rate outlook for the remaining 2023.

The US Dollar Index (DXY) is broadly upbeat amid fears of a slowdown in the global economy. The Chinese economy is facing deflation risks as household demand remains weak due to a rising jobless rate. The Australian Dollar is facing the headwinds of weak China’s economic growth, being a proxy player.

Going forward, the Australian Dollar will dance to the tune of the monthly Consumer Price Index (CPI) data for August, which will be published on Wednesday. The economic data is seen hotter at 5.2% vs. July’s reading of 4.9%. Acceleration in the inflation data could elevate troubles for Reserve Bank of Australia (RBA) policymakers and force them to raise interest rates one more time.

AUD/USD rebounds after discovering buying interest near the horizontal support plotted from August 17 low around 0.6364 on a two-hour scale. While the upside seems restricted near the horizontal resistance placed from August 15 high around 0.6522. The 20-day Exponential Moving Average (EMA), which trades around 0.6340 is overlapping the Aussie asset, indicating a sideways trend.

The Relative Strength Index (RSI) (14) jumps above 60.00, which indicates that the bullish impulse has been triggered.

A decisive break above August 15 high around 0.6522 will drive the asset to August 9 high at 0.6571. Breach of the latter will drive the asset towards August 10 high at 0.6616.

On the flip side, fresh downside would appear if the Aussie asset would drop below August 17 low around 0.6360. This would expose the asset to the round-level support of 0.6300 followed by 03 November 2022 low at 0.6272.

AUD/USD two-hour chart