The AUD/USD pair has continued its upward momentum, breaking through the 0.6600 level and reaching fresh three-week highs near 0.6620. This surge can be attributed to the ongoing weakness in the US Dollar, as well as positive economic data from Australia.
The Australian Wage Price Index rose by 0.8% QoQ in Q2, indicating a strong labor market and potentially paving the way for further interest rate hikes by the Reserve Bank of Australia (RBA).
Investors’ confidence in the Australian currency was also boosted by the RBA’s decision to maintain its official cash rate at 4.35%. The central bank’s cautious approach and optimistic outlook on inflation have further supported the AUD/USD pair.
Looking ahead, the RBA is expected to maintain its hawkish stance, potentially making it the last among the G10 central banks to begin cutting interest rates. This, coupled with potential easing by the Federal Reserve, could continue to support the AUD/USD pair in the coming months.
However, concerns about the Chinese economy, particularly in terms of post-pandemic challenges and lack of stimulus, could pose a risk to the Australian dollar’s recovery. Traders remain net-short on the AUD, reflecting the uncertainty surrounding China’s economic outlook.
AUD/USD Short-term Technical Outlook
On the technical side, further upside in the AUD/USD pair could target the 55-day SMA at 0.6637, with potential resistance levels at 0.6798 and 0.6871. In case of bearish moves, support levels are seen at 0.6347 and 0.6270.
The four-hour chart suggests a modest uptrend, with immediate resistance at 0.6637 and support at 0.6556 and 0.6542. The RSI indicator is currently around 66, indicating bullish momentum.
In summary, the AUD/USD pair is poised for further gains in the short term, supported by a weak US Dollar, positive economic data from Australia, and the RBA’s hawkish stance. However, potential risks from the Chinese economy could impact the pair’s performance in the future.