AUD/USD Continues Upside Momentum, Testing Key Resistance Levels
- AUD/USD added to the weekly upside bias and retested 0.6790.
- The Dollar traded on the defensive as investors waited for the Fed.
- The Fed is widely expected to cut rates later on Wednesday.
Investors witnessed AUD/USD maintaining its bullish momentum for the third consecutive day, reaching three-week highs just below the 0.6800 mark. The US Dollar’s weakness contributed to the positive movement in the risk-associated space on Wednesday, adding to the Aussie’s gains.
Factors Impacting the AUD/USD Pair:
- The upcoming Fed interest rate decision is a critical event that could influence the Australian Dollar’s performance.
- Iron ore prices, a key commodity for Australia, have shown some recovery, but concerns about China’s economic recovery and demand persist.
- The Reserve Bank of Australia (RBA) has maintained a cautious stance on monetary policy, supporting the Australian Dollar’s upward trend.
RBA’s Monetary Policy Stance and Market Expectations:
The RBA has held the Official Cash Rate (OCR) steady at 4.35%, citing inflationary pressures as a concern. While there are discussions about potential rate hikes due to inflation worries, market expectations lean towards rate cuts in late 2024. RBA Governor Michelle Bullock has reiterated the cautious approach, indicating that rate cuts are unlikely in the near term.
Market futures suggest an 85% chance of a 25 bps rate cut by year-end, making the RBA one of the last G10 central banks to consider rate reductions.
Challenges and Opportunities Ahead:
- The slow recovery of the Chinese economy poses a significant obstacle to the Australian Dollar’s gains.
- Speculative net short positions in the Australian Dollar have reached two-week highs, reflecting market sentiment and positioning.
- The Westpac Leading Index, scheduled for release on September 18, will be a key data point for Australia’s economic outlook.
AUD/USD Technical Analysis and Outlook:
Technical analysis suggests further upside potential for the AUD/USD pair, with key resistance levels and support areas to watch:
- Upside Targets: 0.6823, 0.6871, and the psychological level of 0.7000.
- Downside Support: 0.6622, 0.6620 (200-day SMA), and 0.6347.
The four-hour chart indicates a bullish trend, with resistance levels at 0.6789 and 0.6823. Support levels include 0.6732, 0.6705, and 0.6692. The RSI indicator is around 60, suggesting potential further upside movement.
Overall, with market dynamics and economic factors at play, the AUD/USD pair’s performance will be closely watched in the coming days.