The Australian Dollar (AUD) Continues its Uptrend Against the US Dollar (USD)
- AUD/USD exceeded the 0.6700 mark, signaling a strong uptrend.
- The USD maintained a weak performance ahead of the upcoming Federal Reserve event.
- Speculations arise about a potential 50 bps rate cut by the Federal Reserve.
The Australian Dollar (AUD) surged against the US Dollar (USD) as selling pressure on the USD persisted, boosting risk-sensitive assets like the AUD. This momentum propelled AUD/USD above the crucial 0.6700 level on Monday.
Factors Driving AUD/USD Movement
- Positive price action driven by a weak USD and a constructive market outlook.
- Challenges from intermittent USD strength and concerns about China’s economic performance.
- AUD’s correlation with commodity prices, such as copper and iron ore.
Australian Monetary Policy and Economic Outlook
The Reserve Bank of Australia (RBA) has maintained a cautious stance, keeping the Official Cash Rate (OCR) at 4.35% amidst inflationary pressures. The recent RBA Minutes hinted at a possible rate hike, reflecting concerns about inflation and market expectations for rate cuts in late 2024.
RBA Governor Michelle Bullock reiterated a hawkish stance, emphasizing the risks of high inflation and signaling no immediate rate cuts if the economy follows the expected trajectory. Despite this, futures suggest a high probability of a 25 bps rate cut by year-end.
Market Speculation and Outlook
- Expectations of Fed rate cuts supporting AUD/USD gains.
- RBA’s restrictive policy stance contrasting with other G10 central banks.
- Concerns about China’s slow economic recovery affecting AUD performance.
Technical Analysis and Short-Term Outlook
The AUD/USD pair is poised for further gains, targeting key levels such as 0.6823 and 0.7000. Support levels include 0.6622 and 0.6347.
On the four-hour chart, bullish momentum is strengthening, with resistance levels at 0.6748 and 0.6767. Support levels include 0.6696 and 0.6622, with the RSI indicating a positive trend.
Upcoming Data Release
The next data release to watch for is the Westpac Leading Index on September 18, which could provide further insights into the Australian economy’s trajectory.
Conclusion
Overall, the AUD’s performance against the USD is influenced by various factors, including monetary policy decisions, market speculations, and global economic conditions. Understanding these dynamics can help investors and traders make informed decisions when navigating the foreign exchange market.