The AUD/USD pair faced resistance at the key level of 0.6800 after a strong rally on Friday, as the US Dollar regained strength following Powell’s comments. Despite this setback, the pair’s upward momentum remains supported by a breakout above the 200-day SMA, signaling a bullish outlook in the near term.
The recent rally in AUD/USD has been driven by the weakening Dollar and a broader recovery in risk assets. Additionally, positive developments in the commodity market, such as higher copper prices and stable iron ore prices, have contributed to the pair’s strength.
The Reserve Bank of Australia’s hawkish stance on interest rates has also bolstered the Australian Dollar. Governor Michelle Bullock reaffirmed the bank’s readiness to raise rates to manage inflation, signaling a potential shift in policy in the future. The RBA’s decision to maintain the cash rate at 4.35% reflects their cautious approach to inflation pressures.
Traders are closely watching the upcoming inflation report for July, which is expected to show a slowdown in headline inflation to 3.4%. The divergence in monetary policies between the Fed and the RBA could further support a stronger AUD/USD in the coming months.
However, concerns about China’s economic recovery and speculative positioning in the market may limit the Australian Dollar’s gains. Speculators remain net-short on the AUD, although positions have decreased in recent weeks.
AUD/USD Short-Term Technical Outlook
In the short term, the AUD/USD pair is expected to test resistance at 0.6798 and 0.6871, with initial support at 0.6649 and 0.6608. The four-hour chart shows a lack of upward momentum, but the RSI remains around 67, indicating potential for further gains.
Overall, the AUD/USD pair is poised for further upside potential, supported by a hawkish RBA and diverging monetary policies between central banks. Traders should monitor key resistance levels and upcoming economic data to gauge the pair’s future direction.