The Australian Dollar (AUD) showed resilience on Monday, rebounding from intraday losses against the US Dollar (USD) as yields on US Treasury bonds declined, weakening the USD. The bullish sentiment towards the AUD was further bolstered by comments from Reserve Bank of Australia (RBA) Governor Michele Bullock, signaling the potential for future rate hikes rather than cuts in the near term, reported ABC News.
Meanwhile, the USD managed to limit its losses despite the decline, following higher-than-expected US Purchasing Managers Index (PMI) figures from Friday. This data fueled speculation that the Federal Reserve might delay anticipated interest rate cuts, reflected in a slight decrease in market expectations for a rate cut in September, as indicated by the CME FedWatch Tool.
In the Australian market, the ASX 200 Index dipped below 7,750, influenced by a weaker performance on Wall Street, particularly impacting artificial intelligence-related chip stocks like Nvidia.
The People’s Bank of China‘s injection of 50 billion Yuan via seven-day reverse repos, maintaining the reverse repo rate at 1.8%, underscored ongoing economic stability efforts that could impact Australia, given the close trade relationship between the two nations.
Investor caution prevailed ahead of this week’s Australian inflation data, with market sentiment showing reduced expectations for an RBA rate cut this year, now projected to potentially occur in April 2023.
Looking at technical analysis, the AUD/USD pair traded near 0.6630, exhibiting a neutral bias within a rectangle formation on the daily chart. The 14-day Relative Strength Index (RSI) hovered around the 50 level, indicating a lack of strong directional momentum.
Key support levels for the AUD/USD pair were identified at the 50-day Exponential Moving Average (EMA) of 0.6612 and around 0.6585, forming the lower boundary of the rectangle pattern. Resistance levels were anticipated near 0.6700, aligning with the upper boundary of the rectangle, and potentially extending to highs around 0.6714 seen since January.
As global economic indicators and central bank actions continue to influence currency markets, the AUD remains poised within technical boundaries while awaiting further fundamental cues.
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