AUD/USD recovers from decline towards 0.6575, but remains bearish for Tuesday

• The AUD/USD pair fell to known lows after rejection from 0.6625.
• The Australian Dollar found a bottom near 0.6575, but bullish momentum remains weak.
• Australian CPI inflation on the tube ahead of Wednesday's Fed rate call.

The AUD/USD pair is moving around the 0.6600 area as investors prepare for the Australian Consumer Price Index (CPI), which will be released early on Wednesday, before the Federal Reserve of US (Fed) announces a new rate hike.

Australian Q4 CPI is expected to contract slightly on an annualized basis, with headline CPI year-on-year forecast at 4.3% versus 5.4% previously and quarter-on-quarter at 0.8% versus 1.2%.

As for the Fed, markets are awaiting a turnaround from Fed Chair Jerome Powell. Rate swap markets have seen their rate cut bets move further away, with CME's FedWatch tool now seeing less than a 40% chance of a first rate cut by the Fed in March. In December, swaps were forecasting a more than 80% chance of a rate cut in March, but moderating inflation and persistently strong US economic data in the final quarter make a rate cut nearly impossible. rates by the Fed, for fear that inflationary pressures will revive.

The second half of the week will close with the release of China's Caixin Purchasing Managers' Index (PMI), which is expected to decline slightly from 50.8 to 50.6, and broader markets will be watching the release of non-farm payrolls of the US on Friday. Friday's NFP is expected to be 180,000 for January, up from 216,000 in December.

AUD/USD Technical Outlook

AUD/USD regained the 0.6600 zone on Tuesday, following a short-term decline to 0.6575, and the pair is finding intraday technical support at the 200-hour SMA near 0.6590.

The Australian Dollar continues to find technical support at the 200-day SMA just above 0.6550 in the daily candlesticks. The pair remains stuck in a congestion pattern below the 50-day SMA just above 0.6650.

AUD/USD hourly chart

AUD/USD daily chart