**AUD/USD Holds Near Critical Support as Australian Rate Outlook Shifts**
*Original article by FXStreet Editorial Team, with additional insights incorporated.*
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The Australian dollar has managed to stabilize near a vital support level after a volatile trading week, reflecting renewed caution about the Reserve Bank of Australia’s (RBA) policy path and shifting sentiment in global markets. As RBA rate-cut expectations cool and the US dollar trades with a mixed tone, the AUD/USD currency pair faces both domestic and international influences, positioning it at a key crossroads.
**Key Points Overview**
– AUD/USD steadies around crucial 0.6450 support
– RBA’s dovish signals have eased, with market bets on rate cuts moderating
– US Federal Reserve’s “higher for longer” stance contrasts with global peers
– China’s economic outlook and commodity trends weigh on the Australian dollar
– Technical and fundamental signals remain mixed
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### RBA: Changing Tone, Market Reactions
The Reserve Bank of Australia has recently tempered dovish expectations after its June meeting. While it maintained its policy rate at 4.35 percent, the accompanying statement highlighted persistent concerns about inflation, especially in the services sector. This has led financial markets to reconsider how aggressively the central bank will ease monetary policy in the coming quarters.
#### RBA Policy Meeting Highlights
– **Rates unchanged at 4.35 percent:** This keeps the Australian policy rate at its highest level since 2012.
– **Sticky Services Inflation:** The RBA flagged that inflation in services remains elevated, pointing to underlying price pressures.
– **Conditional Guidance:** The central bank signaled willingness to take further action if necessary but stopped short of offering explicit tightening signals.
– **Market reaction:** Initially, markets expected a dovish tilt, but language indicating lingering inflation risks tightened bets on impending rate cuts.
#### Market Bets on RBA Moves
– **September RBA meeting:** Probability of a rate cut now sits below 40 percent, compared to over 50 percent last month (Bloomberg data).
– **Year-end 2024:** Markets now price in less than 30 basis points of easing by December.
– **Drivers:** Swap markets reflect stickier domestic inflation and the RBA’s dependance on upcoming data releases, particularly CPI.
*Additional Insight:* Westpac Bank economists note that while wage gains are moderating, robust population growth and global supply chain improvements will be key variables for the RBA over the next two quarters.
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### US Dollar Dynamics: Cautious Optimism
The trajectory of the US dollar continues to shape AUD/USD valuations. After a hot run fueled by robust growth and persistent inflation, the greenback’s momentum has cooled as investors digest mixed US economic data and the Federal Reserve’s evolving policy stance.
#### Federal Reserve Policy
– **Higher for longer:** The Fed’s June statement reaffirmed patient policy, with most committee members forecasting only one rate cut for 2024.
– **Mixed Data:** While payroll gains were
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