Australian Dollar extends losses, hawkish bets on RBA support

• AUD extended its decline on Tuesday against the USD.
• RBA’s hawkish position on policy provides noticeable support to the Aussie.
• Markets are digesting Jerome Powell’s cautious words, which gave the USD some traction.
• Focus this week will be the reveal of US inflation figures on Thursday.

The Australian Dollar (AUD) racked up more losses on Tuesday against the USD, which managed to gain some ground due to cautious remarks by Jerome Powell. Nevertheless, the pair still maintains a strong position at its highest level since January. The downside for the Aussie appears to be limited, due to strong data reported last week and the continued hawkish stance of the Reserve Bank of Australia (RBA).

The RBA is likely to be one of the last G10 countries' central banks to initiate rate cuts, which should continue to work favorably for the AUD through monetary policy divergence.

Updated daily market movers: AUD sees further losses, attention on Powell and US CPI

• Fed Chair Jerome Powell's Semiannual Monetary Policy Report to Congress saw him acknowledging progress on inflation but that the bank needs data to embrace cuts.
• US CPI is set to be reported on Thursday. The headline is expected to decrease slightly to 3.1% YoY, while the core is anticipated to remain steady at 3.4% YoY.
• This week holds no significant events on Australia's calendar, and the AUD is projected to retain its gains against its competitors as long as the RBA sustains its hawkish stance.
• On the Fed's side, there's now less than a 10% chance of a cut for their next meeting at the end of July and around an 80% chance for a cut in September, contingent on future data.
• On the RBA's side, there’s almost a 50% chance of a September or November rate hike, with the market seriously betting on it.

Technical analysis: AUD/USD’s struggle continues, but further correction possible

The AUD/USD continues on its losing path, marking a two-day losing streak on Tuesday, but the overall outlook remains positive. This is backed by deep positive territory on the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). Having reached near-highs since January, the pair's performance last week has signaled a bullish outlook, but buyers seem to be booking profits.

The next bullish targets are set at 0.6730 and 0.6750, while support levels to keep an eye on are at 0.6670, 0.6650 and 0.6630.