On Wednesday, the AUD/USD pair experienced a slight drop, adjusting to 0.67466 as traders analyzed the recent rally. The ongoing hawkish views of the Reserve Bank of Australia (RBA) continue to back the Aussie against its counterparts, while dovish bets on the Federal Reserve (Fed) weaken the USD.
Market movements are primarily influenced by the divergence in monetary policy between the Fed and the RBA. The Fed’s less aggressive approach towards interest rates contrasts with the RBA’s unwavering stance, positioning the Aussie ahead of the Greenback.
Despite mixed economic outlooks for Australia, the RBA’s high inflation-driven stance has led to minimal expectations of rate cuts in 2024, providing support for the Aussie.
Key Market Trends: Fed’s Soft Stance and RBA’s Hawkish Position Impact AUD/USD
- Softening US labor market data suggests a potential weakening of the USD as the Fed may adopt a less aggressive stance.
- The July Federal Open Market Committee (FOMC) Minutes indicate a possibility of a September cut, adding weight to the argument for a dovish Fed stance.
- The RBA’s clear stance against rate cuts contrasts with the Fed’s position, driving the AUD/USD pair higher.
- Future data releases from both countries will continue to influence the pair’s direction.
- Markets anticipate a 100 bps cut by the Fed by year-end, while expectations for a 25 bps cut by the RBA remain low.
Technical Analysis: AUD/USD Uptrend Continues with Possible Resistance at 0.6750
Technical indicators suggest that the AUD/USD pair maintains an upward trajectory, with the RSI nearing overbought levels around 70. The MACD indicator confirms the bullish sentiment.
Resistance is expected around the 0.6750 level, with potential support in the 0.6700-0.6650 range. Traders should monitor volume and RSI for significant moves above the resistance level.
Analysis Breakdown:
The AUD/USD pair is currently experiencing a slight decline, driven by the RBA’s hawkish stance and dovish bets on the Fed. The divergence in monetary policy between the two central banks is a key factor influencing market movements.
Traders are closely watching upcoming data releases from both countries to gauge the pair’s future direction. While the AUD remains supported by the RBA’s inflation-driven stance, expectations of a dovish Fed are weakening the USD.
Overall, the AUD/USD pair’s movement reflects the ongoing dynamics between the RBA and the Fed, highlighting the importance of central bank policies in shaping currency trends.