Following a period of relative stability for the Australian dollar, the currency is at a crossroads and likely to begin a downward trend due to a resurgent US dollar and the prospect of a rate cut next week, analysts say. Quiet trading is expected in the lead-up to Wednesday's second-quarter consumer price index data from the Australian Bureau of Statistics, which economists have long anticipated will be the deciding factor in whether the Reserve Bank of Australia cuts interest rates at its meeting next week. National Australia Bank's   September target of US72&cent; is at an "important crossroads", with a raft of data and central bank meetings due this week, currency strategist for the bank Rodrigo Catril said.  
On Monday morning, the currency was buying US74.68&cent;."A soft [inflation] print will probably seal the deal for a rate cut in   August and help our forecast be met," he said. However, NAB economists are among the few who are predicting inflation to come in higher than expected, at 0.5 per cent versus the consensus of 0.4 per cent quarter-on quarter. A stronger print would validate the house view that rates would remain on hold in   August, and for the rest of the year. "That in itself will give an uplift in the Australian currency," Mr Catril said. However, external factors are likely to have a more lasting influence on the currency. The US dollar, which has strengthened in recent weeks due to positive economic data, hit a four month high of 97.5 on the Bloomberg Dollar Spot Index on Monday, a measure of the currency against a 10 major peers. The US Federal Reserve releases its statement on Wednesday, and while no interest rate rises are expected, investors are expecting a change in language from the Fed that will pave the way for a hike later this year.   September is the next likely live meeting for the Fed, Westpac senior currency strategist Sean Callow said."The pricing for a rate hike in   September was about zero earlier this month, and now it's about a 25 per cent chance. The market is taking the prosect of the US rate hike seriously," he said.That strength has "chipped away" at the Aussie, reinforced by the growing expectation of a rate cut at home and the changing rate differential between the two nations. But the US dollar is likely to strengthen gradually, with some bumps along the way. Westpac has a   September target of US73&cent; and a year-end target of US71&cent;.Mr Callow said US dollar bulls needed to prepare for the Bank of Japan meeting on Friday. "If they disappoint, it can lead to a nasty pullback in the dollar-yen which will obviously be tough for the dollar index," he said. Also conspiring against a stronger Aussie are commodity prices, with demand for US dollar-denominated commodities, including iron ore, usually falling in response to a stronger greenback. "Commodity prices should chip away at the Aussie as supply remains ample in the months ahead," Mr Callow said."Right now [however] it's not giving you a pressing reason to sell." Mr Catril said commodities would also likely come under pressure from a wind-down in stimulus from China, which has been propping up demand in the first half. Paul Zwi, analyst at Clime Asset Management, forecast the currency hitting as low as US70&cent; in the months ahead."While it is true that commodity prices appear to be stabilising and our interest rates remain relatively high, the Australian dollar is still higher than it should be, and it should weaken over the next year," he said. A loss of Australia's AAA sovereign rating from agencies such as Moody's and Standard & Poor's would also weigh on the currency, he said.