AUD/USD Forex Signal: Bearish Flag Pattern Points To More Downside

Bearish view

 Bullish view

The AUD/USD pair crawled back slightly as the US dollar index (DXY) retreated slightly ahead of the Federal Reserve decision and the US inflation numbers. The pair was trading at 0.6610 on Wednesday, a few points above last Friday’s low of 0.6575. Fed decision and US CPI numbersThe US dollar index tumbled to $104.78 on Wednesday morning ahead of the key CPI data and Fed decision. Similarly, bond yields tumbled, with the 10-year and 30-year yields falling to 4.40% and 4.53%, respectively.This performance is a sign that traders expect the Federal Reserve will deliver a dovish decision even after the strong US jobs data. The report revealed that the economy created over 272k jobs in May while wage growth continued accelerating.In the recent statements, most Fed officials like Raphael Bostic and Loretta Mester noted that the bank will be patient when determining when to cut interest rates. The Fed wants to see more evidence that inflation is falling and moving to its 2% target.Starting to cut interest rates now would be an admission that the Fed does not expect inflation to continue falling to the 2% target soon. Economists polled by Reuters expect the upcoming data to show that the headline CPI rose by 3.5% while the core CPI slowed to 3.6%.The services sector is the biggest driver for the country’s inflation and analysts expect that it will remain like this for a while. Energy prices have also stabilised recently, with the average gasoline standing at $3.44, down from $3.62 a month earlier.The Federal Reserve’s decision comes at a time when the Reserve Bank of Australia (RBA) is preparing for its June meeting. Some analysts, especially from ING Bank, believes that the bank could surprise the AUD/USD market with a rate hike. Like other countries, Australia is going through a period of stagflation, with inflation remaining above the RBA’s target of 2.0%. AUD/USD technical analysisThe AUD/USD pair has drifted upwards slightly in the past few days after crashing to a low of 0.6575 last week. It has crossed the important resistance level at 0.6593, its lowest swing on May 24th and May 30th.The Relative Strength Index (RSI) has pointed upwards and is nearing the neutral level at 50. Also, the Awesome Oscillator has turned green and is about to flip the zero line. However, the pair has also formed a small bearish flag pattern and remained slightly below the 50-period moving average.Therefore, the pair will likely have a bearish breakout after the US CPI data and Federal Reserve decision. If this happens, the pair could drop to the key support at 0.6550.More By This Author:BTC/USD Forex Signal – Inverse Head And Shoulders Pattern FormsCAC 40 Index Forecast: Is This Sell-Off An Overreaction? GBP/USD Forex Signal: Sits At A Key Resistance As Focus Shifts To The Fed Decision