AUD/USD Forecast: Upside looks contained so far
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UPGRADE- AUD/USD’s upswing has faltered around 0.6760 so far.
- Extra gains in the Greenback weighed on the Aussie dollar.
- Attention now shifts to the Chinese CPI due on Wednesday.
Another inconclusive session left AUD/USD lingering around the 0.6730 region on Tuesday, correcting lower after hitting fresh multi-month peaks at the beginning of the week.
This correction in the pair was due to an acceptable rebound in the US Dollar (USD), as investors analyzed the first semi-annual testimony by Chief Jerome Powell before Congress. On this, Powell maintained a cautious tone regarding the potential timing of an interest rate cut by the Federal Reserve (Fed), suggesting that further evidence that inflation is heading towards the target is needed before any move on rates.
Additionally, the Australian dollar's pullback was influenced by another dip in copper and iron ore prices, both of which added to losses witnessed at the beginning of the week.
On the monetary policy front, the Reserve Bank of Australia (RBA), like the Federal Reserve (Fed), is anticipated to be one of the last G10 central banks to start cutting interest rates.
In its latest meeting, the RBA maintained a hawkish stance, keeping the official cash rate at 4.35% and indicating flexibility for future decisions. The Minutes from that event revealed that the decision to hold the policy rate was primarily due to "uncertainty around consumption data and clear evidence of financial stress among many households."
Overall, the RBA is in no hurry to ease policy, expecting it will take some time before inflation is sustainably within the 2-3% target range. That said, there is just around a 25% probability of a rate reduction in August, rising to around 50% for the next few months.
Moreover, the potential easing by the Fed, contrasted with the RBA's likely prolonged restrictive stance, could support AUD/USD in the coming months. However, concerns about slow momentum in the Chinese economy might hinder a sustained recovery of the Australian currency as China continues to face post-pandemic challenges.
On the domestic data front, Consumer Confidence in Oz eased to 82.7 in July, according to Westpac. Something to pay attention to will come from the release of Chinese inflation figures for the month of June, due on July 10.
AUD/USD daily chart
AUD/USD short-term technical outlook
If bulls push harder and AUD/USD clears the July high of 0.6761 (July 8), it may test the December 2023 top of 0.6871, followed by the July 2023 peak of 0.6894 (July 14), all ahead of the key 0.7000 barrier.
Bearish efforts, on the other side, might drive the pair lower, first to the June low of 0.6574 (June 10) and subsequently to the key 200-day SMA of 0.6565. A further drop might mean a return to the May low of 0.6465 and the 2024 bottom of 0.6362 (April 19).
Overall, the uptrend should continue as long as AUD/USD is trading above the 200-day SMA.
The 4-hour chart shows the pair appears stuck within some consolidative range. That being said, 0.6761 appears to be the early hurdle, ahead of 0.6871. On the other hand, 0.6709 provides immediate support, ahead of the 55-SMA of 0.6694. The RSI rose to around 60.
- AUD/USD’s upswing has faltered around 0.6760 so far.
- Extra gains in the Greenback weighed on the Aussie dollar.
- Attention now shifts to the Chinese CPI due on Wednesday.
Another inconclusive session left AUD/USD lingering around the 0.6730 region on Tuesday, correcting lower after hitting fresh multi-month peaks at the beginning of the week.
This correction in the pair was due to an acceptable rebound in the US Dollar (USD), as investors analyzed the first semi-annual testimony by Chief Jerome Powell before Congress. On this, Powell maintained a cautious tone regarding the potential timing of an interest rate cut by the Federal Reserve (Fed), suggesting that further evidence that inflation is heading towards the target is needed before any move on rates.
Additionally, the Australian dollar's pullback was influenced by another dip in copper and iron ore prices, both of which added to losses witnessed at the beginning of the week.
On the monetary policy front, the Reserve Bank of Australia (RBA), like the Federal Reserve (Fed), is anticipated to be one of the last G10 central banks to start cutting interest rates.
In its latest meeting, the RBA maintained a hawkish stance, keeping the official cash rate at 4.35% and indicating flexibility for future decisions. The Minutes from that event revealed that the decision to hold the policy rate was primarily due to "uncertainty around consumption data and clear evidence of financial stress among many households."
Overall, the RBA is in no hurry to ease policy, expecting it will take some time before inflation is sustainably within the 2-3% target range. That said, there is just around a 25% probability of a rate reduction in August, rising to around 50% for the next few months.
Moreover, the potential easing by the Fed, contrasted with the RBA's likely prolonged restrictive stance, could support AUD/USD in the coming months. However, concerns about slow momentum in the Chinese economy might hinder a sustained recovery of the Australian currency as China continues to face post-pandemic challenges.
On the domestic data front, Consumer Confidence in Oz eased to 82.7 in July, according to Westpac. Something to pay attention to will come from the release of Chinese inflation figures for the month of June, due on July 10.
AUD/USD daily chart
AUD/USD short-term technical outlook
If bulls push harder and AUD/USD clears the July high of 0.6761 (July 8), it may test the December 2023 top of 0.6871, followed by the July 2023 peak of 0.6894 (July 14), all ahead of the key 0.7000 barrier.
Bearish efforts, on the other side, might drive the pair lower, first to the June low of 0.6574 (June 10) and subsequently to the key 200-day SMA of 0.6565. A further drop might mean a return to the May low of 0.6465 and the 2024 bottom of 0.6362 (April 19).
Overall, the uptrend should continue as long as AUD/USD is trading above the 200-day SMA.
The 4-hour chart shows the pair appears stuck within some consolidative range. That being said, 0.6761 appears to be the early hurdle, ahead of 0.6871. On the other hand, 0.6709 provides immediate support, ahead of the 55-SMA of 0.6694. The RSI rose to around 60.
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