The AUD/USD pair continues to strengthen for the second consecutive day, benefiting from a positive market outlook. Despite a boost in the US Dollar due to reduced expectations for a large Fed rate cut, the AUD maintains its upward trend. Traders are now eagerly awaiting the release of the US PPI report for potential short-term market movements.
Following a rebound from a four-week low near the 200-day SMA, the AUD/USD pair has reached a fresh weekly peak during the early European session. This surge is fueled by an optimistic market sentiment that favors the risk-sensitive Australian Dollar. The recent US CPI report confirmed market predictions of an upcoming Fed policy easing cycle, further boosting global market confidence.
While the headline CPI in the US rose by 0.2% in August, the yearly rate decreased to 2.5%, lower than expected. Additionally, a weak Japan PPI reading dampened hawkish signals from the Bank of Japan, encouraging investors to seek riskier assets. Despite this, the core US CPI remains stable, indicating persistent inflation and reducing hopes for a significant 50 bps Fed rate cut. Market expectations now lean towards a 25 bps rate cut at the next FOMC meeting, influencing US Treasury bond yields and the strength of the US Dollar.
Looking ahead, the focus shifts to the US PPI release and the impact it may have on the AUD/USD pair. Market movements will also be influenced by US bond yields and broader risk sentiment, creating short-term trading opportunities.
Technical Analysis
The 0.6700 resistance level presents a crucial point for the AUD/USD pair, with a potential breakout signaling further appreciation towards the 0.6740 and 0.6765 regions. On the downside, the 100-day SMA acts as immediate support, followed by the 0.6620 area. A break below these levels could lead to a further decline towards the 0.6570-0.6565 support zone.
AUD/USD 4-hour chart
