- AUD/USD scales higher for the third straight day and touches a fresh multi-week top on Monday.
- Fed rate cut bets, along with the RBA’s hawkish stance, remain supportive of the strong move up.
- The technical setup favors bullish traders and supports prospects for a further appreciating move.
The AUD/USD pair sticks to its intraday gains through the early part of the European session and currently trades around the 0.6685 region, up over 0.25% for the day.
Expectations that the Federal Reserve (Fed) will start its rate-cutting cycle in September drag the US Dollar (USD) to its lowest level since January This, along with the Reserve Bank of Australia's (RBA) hawkish stance, turn out to be a key factor acting as a tailwind for the AUD/USD pair for the third successive day.
Meanwhile, technical indicators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone. This, along with the recent breakout through the 200-day Simple Moving Average (SMA), suggests that the path of least resistance for the AUD/USD pair is to the upside
Bulls, however, need to wait for some follow-through buying beyond the 0.6700 handle before positioning for an extension of the recovery from the 0.6520-0.6515 area, or the YTD low touched earlier this month The AUD/USD pair might then climb to the 0.6745 intermediate hurdle before aiming to conquer the 0.6800 mark.
On the flip side, the Asian session low, around the 0.6650 area, is likely to act as immediate support ahead of the 0.6600 mark, or the 200-day SMA resistance breakpoint. The latter should now act as a strong base, which if broken might prompt aggressive technical selling around the AUD/USD pair and pave deeper losses.
The next relevant support is pegged near the 0.6565 area, below which the slide could extend towards the 0.6520-0.6510 region. Some follow-through selling below the 0.6500 psychological mark will suggest that the move-up witnessed over the past two weeks or so has run out of steam and shift the bias in favor of bearish traders.
AUD/USD daily chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: The hunt for 0.6800
![AUD/USD: The hunt for 0.6800](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/AUDUSD/hundred-bucks-3645622_XtraSmall.jpg)
AUD/USD extended its strong uptrend and reclaimed the area beyond the key 0.6700 barrier to print fresh five-week highs ahead of the release of the RBA Minutes.
EUR/USD clinches 2024 highs and retargets 1.1100
![EUR/USD clinches 2024 highs and retargets 1.1100](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/world-currencies-53475296_XtraSmall.jpg)
EUR/USD rose to levels last seen in late December 2023 and approached the key 1.1100 hurdle, always on the back of the incessant selling pressure in the US Dollar prior to the FOMC Minutes and Powell’s speech at Jackson Hole.
Gold stable above $2,500 and looking for fresh record highs
![Gold stable above $2,500 and looking for fresh record highs](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/gold-bars-50657756_XtraSmall.jpg)
The persevering sell-off in the greenback, coupled with lower US yields and hopes of an interest rate cut by the Fed in September, all prompt Gold prices to dispute their record high past the $2,500 mark per ounce troy.
XRP Ledger transactions dropped to nearly a sixth of their value this year
![XRP Ledger transactions dropped to nearly a sixth of their value this year](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/Coins/Ripple/Ripple_Watch_XtraSmall.jpg)
Ripple trades at $0.5833 on Monday as the altcoin extends gains and recovers from the crypto market crash in early August. The Ripple stablecoin announcement, the Securities & Exchange Commission vs. Ripple lawsuit ruling and recent research reports published by SBI-owned HashHub are the key market movers for the altcoin this week.
International economic outlook
![International economic outlook](https://editorial.fxstreet.com/images/Macroeconomics/Countries/dotted-world-map-and-businessman-gm468917358-62044988_XtraSmall.jpg)
We have not made material forecast changes to our economic or inflation outlooks. This month, we continue to forecast 2024 global GDP growth of 2.9% and global CPI inflation of 3.6%. In the United States, we maintain our view for a “soft landing” although acknowledge that recession risks are rising.