The Reserve Bank of Australia will conduct its August meeting on Tuesday. The overwhelming majority of analysts believe that the central bank will keep all monetary policy parameters unchanged, including the interest rate at 4.35%.

A "wait-and-see" outcome will not come as a surprise. After three consecutive rate hikes, the central bank paused in June, while fresh statistics on inflation and Australia's labor market have reduced the need for further tightening of monetary policy. Therefore, the main intrigue of the July meeting lies in another question: will the August pause be "dovish"? If the RBA underscores ongoing inflation risks and focuses on the problems of domestic demand and the labor market, the Australian dollar will be under significant pressure. The likelihood of such a scenario is quite high, considering the current macroeconomic landscape.

The main argument in favor of softening the RBA's rhetoric is the July inflation report from Australia. Quarterly CPI in the second quarter of this year increased by only 0.6%, following a rise of 1.4% in the previous reporting period. The year-on-year inflation rate slowed to 4.0%, down from 4.1%. The dynamics of core inflation are also important in this context: the trimmed mean rose by 0.8%, while most analysts had forecast a more substantial increase (0.9%). Year-on-year, the core index increased by 3.6%. On the one hand, this figure remains above the RBA's target range (2-3%), but on the other hand, it no longer shows the growth rates that had previously raised concerns for the central bank.

It is also worth noting the structure of the slowdown in quarterly inflation. The reduction of fuel excise taxes played a key role in curbing CPI. The government temporarily cut the excise, which, along with other measures (such as releasing reserves), helped reduce the cost of gasoline. This is important because it was the energy shock amid escalating conflict in the Middle East that previously posed a risk of a new inflationary impulse. Now, however, fuel is becoming a source of disinflation, despite the ongoing tensions between the US and Iran.

Additional pressure on the quarterly CPI figure came from domestic transportation tariffs and tourism services.

In other words, the inflation picture in Australia remains quite heterogeneous. The key source of price pressure is housing—prices in this category have risen by 6.8% year-on-year (with new residential properties up 5.8% and rents up 3.6%). Electricity prices have significantly increased by 22.4%. However, there is an important nuance: such a rapid jump in electricity prices is related to the expiration of government subsidies, meaning this is not a classic demand-driven inflation impulse.

Another argument in favor of dovish rhetoric from the RBA is the state of the labor market. Here, too, the picture is rather ambiguous. In June, employment rose by a substantial 76,300 people. At first glance, this does indeed seem like a strong result, but only from a formal perspective, as about two-thirds of the increase came from part-time employment (with a ratio of 47,000 part-time versus 29,300 full-time). The unemployment rate increased to 4.4%, and the number of unemployed rose by 12,700. The total underutilization of the labor force reached 10.9%.

All this suggests that the growth of the "headline" indicator does not reflect the actual state of the labor market. Other indicators in this sphere are not on the Aussie's side either. Specifically, the number of job vacancies decreased by 2.1% to 329,000. This is the first quarterly decline since the middle of last year, and the negative dynamics were recorded in both the private and public sectors (the largest decline occurred in the financial, placement, and hospitality sectors).

At the same time, wage growth in the latest available report (for the first quarter) remained quite moderate at 3.3% year-on-year. More recent data (for the second quarter) will be published after the RBA meeting, specifically on August 19.

Therefore, in my opinion, the RBA has every reason to implement a "dovish pause" scenario. The central bank is unlikely to declare victory over inflation: the core indicator is still above the target range, and housing and services inflation remain resilient. However, recent data indicate that the effects of previous monetary policy tightening are gradually manifesting: inflationary pressure is easing, labor market tensions are easing, and the number of vacancies is decreasing. Thus, the RBA may indicate that the current interest rate is already exerting the necessary "cooling" effect on the economy and that further increases are not part of the central bank's baseline scenario. Such rhetoric may put pressure on the Australian dollar and, consequently, on the AUD/USD pair.

From a technical standpoint, the pair is between the average and upper lines of the Bollinger Bands on the four-hour chart and above all lines of the Ichimoku indicator. Therefore, considering short positions would be appropriate only after the price falls below the support level of 0.7060 (where the average line of the Bollinger Bands coincides with the Tenkan-sen and Kijun-sen lines on the H4 timeframe). The main target for the downward move is the 0.7000 mark (the average line of the Bollinger Bands, coinciding with the Tenkan-sen line on the D1 timeframe).