CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

Rally in Australian Dollar (AUD) over the last few weeks came on the back of hawkish RBA remarks, broadly softer USD, riskon sentiment and higher iron ore prices, OCBC FX strategists Frances Cheung and Christopher Wong note.

Corrective pullback is not ruled out for now

“But the rise has met resistance at near 0.68 (the high for the year). Pair failing to break above it for the second time forms an interim double-top. Last seen at 0.6780. Bullish momentum on daily chart intact but RSI eased from near overbought conditions. Corrective pullback is not ruled out for now.”

“Geopolitical risks may undermine sentiments Support seen at 0.6730 (23.6% fibo), 0.6640/50 levels (38.2% fibo retracement of 2023 low to 2024 high, 50 DMA). Resistance at 0.6799 (double top). Break-out should see AUD bulls regain momentum to test 0.6870 levels.”

• AUD/USD struggles to extend its upside above 0.6800 as investors have sidelined ahead of Aussie inflation for July.
• The appeal of risky assets remains firm amid optimism over Fed interest rate cuts in September.
• The next move in the US Dollar will be guided by the US core PCE inflation for July.

The AUD/USD pair turns sideways after a juggernaut rally to a fresh six-week high near 0.6800 in Tuesday’s European session. The rally in the Aussie asset appears to have stalled as investors shift focus to the Australian monthly Consumer Price Index (CPI) data for July, which will be published on Wednesday.

Annually, the inflation data is estimated to have decelerated to 3.4% from the prior release of 3.8%. An expected decline in price pressures would market speculation that the Reserve Bank of Australia (RBA) is unlikely to cut interest rates this year.

Meanwhile, upbeat market sentiment continues to cushion the downside in the Australian Dollar (AUD). The market mood seems favorable for risky assets, given that the Federal Reserve (Fed) is widely anticipated to start reducing interest rates from the September meeting. S&P 500 futures have posted decent gains in European trading hours. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, struggles to gain ground after posting a fresh year-to-date low of 100.53.

Although Fed September interest rate cuts appear certain, traders remain split over the potential rate-cut size. According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that the probability of a 50-basis points (bps) interest rate reduction in September is 28.5%, while the rest points to a 25-bps rate cut.

For fresh cues about the likely size, investors await the United States (US) core Personal Consumption Expenditure Price Index (PCE) data for July, which will be published on Friday. The annual core PCE is estimated to have accelerated to 2.7% from the prior release of 2.6%, with monthly figures growing steadily by 0.2%.

The Australian Dollar (AUD) is likely to trade in a sideways range of 0.6750/0.6790. In mid-term, outsized advance suggests further AUD strength; given the overbought conditions, it remains to be seen if 0.6870 is within reach, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

A move towards 0.6870 is possible mid-term

24-HOUR VIEW: “After AUD surged last Friday, we indicated yesterday that “conditions are severely overbought, but there appears to be enough momentum to break clearly above 0.6800.” Our view did not materialise, as AUD traded in a sideways range of 0.6768/0.6798, closing at 0.6772 (- 0.38%). Momentum indicators are turning neutral, and further sideways trading seems likely. Expected range for today: 0.6750/0.6790.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (26 Aug, spot at 0.6790). As indicated, while the outsized advance from last Friday suggests further AUD strength, given the overbought conditions, it remains to be seen if 0.6870 is within reach in the next 1 to 2 weeks. On the downside, if AUD breaks the ‘strong support’ at 0.6710 (no change in level), it would suggest that it is not strengthening further.”

• AUD/USD drops from 0.6800 with Aussie inflation under the spotlight.
• The Fed seems prepared to begin reducing interest rates from September.
• The near-term outlook of the US Dollar remains weak.

The AUD/USD pair falls from the monthly high of 0.6800 in Monday’s American session. The Aussie asset drops as the US Dollar (USD) edges higher. While the near-term outlook of the US Dollar remains vulnerable as the Federal Reserve (Fed) is widely anticipated to start reducing interest rates from the September meeting.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises slightly to near 100.90 from the annual low of 100.53.

While the Fed seems certain to cut interest rates in September, traders remain split over the likely size. According to the CME FedWatch tool, 30-day Federal Funds futures pricing data shows that the likelihood of a 50-basis point (bps) interest-rate reduction is 36.5%, while rest of the bets are in favor of a 25-bps rate cut.

Meanwhile, the Australian Dollar (AUD) will be influenced by the monthly Consumer Price Index (CPI) data for July, which will be published on Wednesday. Economists estimated that price pressures declined sharply to 3.4% from 3.8% in June. An expected decline in the inflation data would bring expectations of interest rate cuts to the table.

AUD/USD trades close to the monthly high of 0.6800 on a daily timeframe. The near-term outlook of the Aussie asset remains firm as the 10-day Moving Average (EMA) near 0.6700 is sloping higher. The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum.

For a fresh upside, a decisive move above the round-level resistance of 0.6800 will push the asset higher to 0.6840, the higher level seen this year. A breach of the latter would drive the asset towards December 2023 high of 0.6870.

In an alternate scenario, a downside move below August 19 low of 0.6660 will expose the asset to June 28 low of 0.6620 and June 17 low of 0.6585.

AUD/USD daily chart

Conditions are severely overbought, but there appears to be enough momentum for the Australian Dollar (AUD) break clearly above 0.6800, but, given the overbought conditions, it remains to be seen if 0.6870 is within reach, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

A break above 0.6800 is getting more unlikely

24-HOUR VIEW: “We did not expect AUD to jump by 1.37% (NY close of 0.9797) last Friday. The 1.37% gain is the biggest 1-day advance this year. Predictably, after such a strong surge in a short span of time, conditions are severely overbought. However, there appears to be enough momentum for AUD to break clearly above 0.6800. The next resistance at 0.6870 is highly unlikely to come into view today. There is another resistance at 0.6830. On the downside, any pullback is not expected to threaten the support at 0.6745 with minor support at 0.6760.”

1-3 WEEKS VIEW: “In our most recent narrative was from last Thursday (22 Aug, spot at 0.6750), we indicated that ‘while upward momentum has slowed somewhat, it is too early to call for an end to the advance in AUD.’ We added, “provided that the ‘strong support’ level at 0.6660 is not taken out, AUD could continue to advance, possibly to last month’s high, near 0.6800.’ Last Friday, AUD jumped to within one pip of 0.6800, reaching a high of 0.6799. The outsized advance continues to suggest further AUD strength. However, given the overbought conditions, it remains to be seen if 0.6870 is within reach in the next 1 to 2 weeks. On the downside, the ‘strong support’ level has moved higher to 0.6710 from 0.6660.”

• AUD/USD drops from 0.6800 with Aussie inflation in focus.
• The monthly Australian CPI is expected to have declined to 3.4% in July from 3.8% in June.
• Investors see the Fed starting to reduce interest rates in September.

The AUD/USD pair slides from the monthly high of 0.6800 in Monday’s European session. The Aussie asset drops as the Australian Dollar (AUD) weakens amid uncertainty ahead of the monthly Consumer Price Index (CPI) data for July, which will be published on Wednesday.

The inflation data is expected to show that the annual CPI decelerated to 3.4% from 3.8% in June, which will prompt expectations that the Reserve Bank of Australia (RBA) could consider interest rate cuts this year.

The recent release of the RBA minutes indicated that the RBA is unlikely to cut its Official Cash Rate (OCR) in the remaining year as it will remain vigilant to upside risks to inflation.

Meanwhile, upbeat market sentiment fails to uplift the Australian Dollar. The market mood seems favorable for risky assets as traders have fully priced in the Federal Reserve (Fed) interest rate cuts in September. S&P 500 futures have posted decent gains in the European session. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges high after posting a fresh year-to-date (YTD) low of 100.53.

Market speculation for Fed interest rate cuts appears to be certain as Fed Chair Jerome Powell said in his speech at the Jackson Hole (JH) Symposium on Friday, “The time has come for policy to adjust.”

Going forward, investors will focus on the US Durable Goods Orders data for July, which will be published at 12:30 GMT. New Orders for Durable Goods, a key measure of core consumer inflation, is estimated to have grown at a robust pace of 4% after a significant decline in June.

• AUD/USD trades weaker near 0.6790 in Monday’s early Asian session. 
• Fed’s Powell said 'time has come' for interest rate cuts. 
• The RBA’s hawkish comments might cap the AUD's downside in the near term. 

The AUD/USD pair trades on a weaker note around 0.6790 during the early Asian session on Monday. However, the US Dollar (USD) is likely to remain under pressure after US Federal Reserve Chairman Jerome Powell’s dovish Jackson Hole speech. The US Durable Goods Orders for July are due later on Monday. 

Fed Chair Powell spoke at the Kansas City Fed's annual economic symposium in Jackson Hole on Friday, saying, "The time has come for policy to adjust.” Powell did not mention when rate cuts would start or how large they might be, but the markets expect the Fed to announce a quarter-point rate cut in the September meeting. The FOMC Minutes from the July meeting last week showed a “vast majority” of Fed officials believe a September cut will be appropriate so long as there are no data surprises. 

Following Powell’s speech, Philadelphia Fed President Patrick Harker said that the US central bank needs to lower rates methodically. Meanwhile, Chicago Fed President Austan Goolsbee said that monetary policy is currently at its most restrictive level, and the Fed’s focus is now shifting towards achieving its employment mandate. The expectation of the Fed rate cut is likely to exert some selling pressure on the USD and create a tailwind for AUD/USD. 

On the Aussie front, the Reserve Bank of Australia (RBA) Minutes revealed that the board members agreed that a rate cut is unlikely soon. RBA Governor Michele Bullock noted that the central bank will not hesitate to raise rates again to combat inflation if needed. The hawkish remarks from the RBA might further boost the AUD against the Greenback. 

• AUD/USD is correcting within its short-term uptrend. 
• The pair broke below a key trendline but has recovered over recent periods.
   

AUD/USD corrects back after becoming overbought. 

The pair pulls back below the trendline for its short-term uptrend during August – a bearish sign – however, it has also tracked higher over recent periods after posting a swing low at 0.6697 on August 22.

AUD/USD 4-hour Chart

AUD/USD is still probably in a short-term uptrend which given “the trend is your friend” favors more upside. The pair might continue up to 0.6799, the July 11 high. A break back above the August high of 0.6761 would help confirm further upside. 

A break below the 0.6697 (swing low and low of August 22), however, would indicate the correction had still further to fall, perhaps to a downside target at either the 50-period Simple Moving Average (SMA) at 0.6683 or the 200 SMA at 0.6636. 

The Australian Dollar (AUD) could continue to advance, possibly to last month’s high, near 0.6800, UOB Group FX strategists Quek Ser Leang and Peter Chia note.

0.6800 is the next level to watch

24-HOUR VIEW: “We expected AUD to trade in a 0.6720/0.6765 range. Our view was incorrect, as it dropped to a low of 0.6697, closing lower by 0.58% (0.6705). There has been a slight increase in downward momentum, but probably not enough to threaten the strong support at 0.6660. Resistance is at 0.6725; a breach of 0.6750 would mean that the current mild downward pressure has faded.”

1-3 WEEKS VIEW: “Yesterday (22 Aug, spot at 0.6750), we indicated that ‘while upward momentum has slowed somewhat, it is too early to call for an end to the advance in AUD.’ We added, ‘provided that the ‘strong support’ level at 0.6660 is not taken out, AUD could continue to advance, possibly to last month’s high, near 0.6800.’ There is no change in our view.”

• AUD/USD attracts some dip-buyers on Friday amid a modest USD weakness.
• The divergent Fed-RBA policy outlook offers additional support to the major. 
• Bulls now await Fed Chair Jerome Powell’s speech before placing fresh bets.

The AUD/USD pair regains positive traction on Friday and for now, seems to have stalled its modest retracement slide from the 0.6760 area, or over a one-month high touched earlier this week. Spot prices stick to intraday gains through the first half of the European session and currently trade around the 0.6725 region, up 0.30% for the day.

The US Dollar (USD) struggles to capitalize on the overnight recovery from the YTD low and attracts fresh sellers amid dovish Federal Reserve (Fed) expectations, which, in turn, is seen lending some support to the AUD/USD pair. In fact, the markets now seem convinced that the US central bank will begin its policy easing cycle in September and have fully priced in a 25 basis points (bps) rate cut. Furthermore, the CME Group's FedWatch Tool indicates the possibility of a larger, 50 bps rate cut next month and about a 100 bps of easing by the end of this year. 

The Australian Dollar (AUD), on the other hand, continues to draw support from the Reserve Bank of Australia's (RBA) hawkish stance, showing readiness to hike interest rates again in the face of more upside risks to inflation. This is seen as another factor acting as a tailwind for the AUD/USD pair. Bulls, however, might refrain from placing aggressive bets and prefer to wait for Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. Investors will look for cues about the rate-cut path, which will influence the USD and provide some meaningful impetus. 

From a technical perspective, the recent breakout through the 0.6600 confluence – comprising 100- and 200-day Simple Moving Averages (SMA) – and a subsequent strength beyond the 0.6700 mark was seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the upside and supports prospects for an extension of the recent strong recovery from the YTD low touched earlier this month.

Bulls, however, might wait for some follow-through buying beyond the 0.6750 horizontal barrier before placing fresh bets. The AUD/USD pair might then aim to challenge the YTD peak, around the 0.6800 round figure mark, before climbing further towards the December 2023 swing high, around the 0.6870 region.

On the flip side, the 0.6700 mark is likely to protect the immediate downside ahead of the 0.6675 zone, below which the AUD/USD pair could slide back to the 0.6600 confluence resistance breakpoint, now turned support. The latter should act as a strong base, which if broken decisively might prompt aggressive technical selling and drag spot prices to the 0.6550-0.6545 intermediate support en route to the 0.6500 psychological mark.

AUD/USD daily chart

• AUD/USD bounces back as the US Dollar falls after a short-lived pullback post US weekly jobless claims data.
• The upside in the US Dollar remains capped by optimism over Fed interest rate cuts in September.
• Australian Composite PMI returns to expansion in August.

The AUD/USD pair discovers buying interest from the intraday low of 0.6725 in Thursday’s New York session. The Aussie asset is expected to resume its upside journey as the US Dollar (USD) retreats after the release of the United States (US) Initial Jobless Claims report for the week ending August 16.

The report showed that the number of individuals claiming jobless benefits for the first time came in higher at 232K from the estimates of 230K and the prior release of 228K, upwardly revised from 227K, accelerating worries of deteriorating labor market conditions. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls after a short-lived pullback move to near 101.40.

The near-term appeal of the US Dollar is already vulnerable as the Federal Reserve (Fed) seems to be on track to start reducing interest rates in September. The latest Federal Open Market Committee (FOMC) minutes showed that the ‘vast majority’ of officials see interest rate cuts appropriate in September, given that price pressures continue to ease as expected.

Meanwhile, investors await Fed Chair Jerome Powell’s speech at the Jackson Hole (JH) Symposium on Friday. Investors will look for cues about the likely size of interest rate cuts in September and how much they will be reduced by the year-end.

In the Asia-Pacific region, the Australian Dollar (AUD) has outperformed the US Dollar in the last three weeks amid firm speculation that the Reserve Bank of Australia (RBA) will not cut interest rates this year. The RBA is expected to leave its Official Cash Rate (OCR) at its current level for an extended period as officials remain vigilant to upside risks to inflation.

On the economic data front, the flash Australian Judo Bank PMI report showed that the overall business activity expanded to 51.4 after contracting to 49.9 in July, boosted by a sharp increase in the service sector. While activities in the manufacturing sector contracted at a slower pace.

The Australian Dollar (AUD) is expected to trade in a 0.6720/0.6765 range. AUD could continue to advance, possibly to last month’s high, near 0.6800, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

Set to break above last month’s high near at 0.6800

24-HOUR VIEW: “AUD fluctuated between 0.6732 and 0.6761 yesterday, closing largely unchanged at 0.6744 (-0.04%). The current price movements are likely part of a range trading phase. Today, we expect AUD to trade in a range of 0.6730/0.6765.”

1-3 WEEKS VIEW: “AUD snapped its 4-day winning streak yesterday, closing marginally lower by 0.04% (0.6744). While upward momentum has slowed somewhat, it is too early to call for an end to the advance in AUD. Provided that the ‘strong support’ level at 0.6660 is not taken out, AUD could continue to advance, possibly to last month’s high, near 0.6800.”

• AUD/USD price may advance further daily chart analysis indicates strengthening of a bullish bias.
• The 9-day EMA is positioned above the 50-day EMA, suggesting the recent price action outperforming the longer-term trend.
• The seven-month high of 0.6798 level appears as the key barrier.

AUD/USD retraces its recent losses from the previous session, trading around 0.6750 during Thursday’s European hours. The daily chart analysis indicates that the pair trends upwards within an ascending channel pattern, reinforcing the bullish bias.

The 14-day Relative Strength Index (RSI) consolidates slightly below the 70 level, indicating that bullish momentum is in play. However, if the RSI reaches 70, it would signal that the AUD/USD pair is entering overbought territory, suggesting a potential correction might be imminent.

Moreover, the daily chart analysis also indicated that the 9-day Exponential Moving Average (EMA) is positioned above the 50-day EMA, which is typically interpreted as a bullish signal. This suggests that the recent price action is outperforming the longer-term trend.

In terms of resistance, the AUD/USD pair could target the region near its seven-month high of 0.6798, reached on July 11. A break above this level would likely encourage the pair to test the upper boundary of the ascending channel around the 0.6860 level.

On the downside, the AUD/USD pair may first test the lower boundary of the ascending channel around the 0.6700 level, followed by the nine-day EMA at 0.6686. The next support lies at the 50-day EMA at 0.6634.

A break below the 50-day EMA could weaken the bullish bias and increase downward pressure, leading the AUD/USD pair to test the throwback support at 0.6575. If the pair falls below this support, it could extend its decline toward the next throwback level at 0.6470.

AUD/USD: Daily Chart