Australian Dollar sees mild correction, markets await Australian labor data

• AUD/USD shows a slight decrease on Monday but retains January highs near 0.6800.
• RBA's hawkish stance and potential rate hike add momentum to AUD.
• Australian labor data will dictate the short-term dynamics.

The Australian Dollar (AUD) experienced a mild correction against the USD in Monday's session, declining to 0.6760. After a four-day winning streak, the AUD adjusted its gains albeit the underlying fundamental factors hint at a possible continuation in the upward trend.

The Reserve Bank of Australia (RBA) despite several signs of economic weakness in the Australian economy, is viewed to be among the last G10 nations' central banks to initiate rate cuts due to stubbornly high inflation, a factor that might limit AUD's downside and extend its gains.

Daily market movers: AUD may gain as labor data may justify the RBA’s hawkish stance

• On the economic data front, investors are focusing on the Australian Employment data for June, which is due for publication on Thursday.
• The report is expected to show that 20K job-seekers were hired against 39.7K onboarded in May.
• The unemployment rate will be on the look and if it remains steady at 4.0%, it would indicate a strong labor market, hence, fuelling expectations of further policy-tightening by the Reserve Bank of Australia (RBA).
• According to recent market speculations, there is nearly a 50% chance of a rate hike in either September or November on the RBA's side.
• On the other hand, the market sees more than 80% odds of a September cut by the Federal Reserve, dependent of course on the incoming data. Key speeches by Powell on Monday, and other officials this week will provide more clarity.

Technical Analysis: AUD/USD sustains highs, overbought indicators hint at looming correction

Despite the mild correction on Monday, the AUD/USD maintains a bullish stance, retaining the heights seen since January. Parallelly, the pair climbed by more than 1.5% in July, suggesting a strong upward move. However, the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicate nearing overbought territory and some exhaustion, suggesting a possible correction is on the horizon.

Buyers' target remains to maintain the 0.6760-0.6780 range and possibly surpass the 0.6800 area. Conversely, the 0.6730, 0.6700, and 0.6650 levels are set as the support ranges in case of a correction.