The Australian Dollar (AUD) saw a halt in its winning streak against the US Dollar (USD) on Tuesday. However, the AUD/USD pair may find renewed strength following the release of the Reserve Bank of Australia‘s (RBA) August meeting minutes, which hinted that the cash rate might remain steady for an extended period.
In its recent meeting, the Reserve Bank of Australia considered raising interest rates but ultimately decided that keeping the rate steady better balanced the associated risks. The RBA members concurred that a rate cut is unlikely in the near term.
Meanwhile, the People’s Bank of China (PBoC) maintained its one-year and five-year Loan Prime Rates (LPRs) at 3.35% and 3.85%, respectively, during its August meeting on Tuesday. Any economic shifts in China could impact Australian markets due to their close trade relationship.
The US Dollar continues to face downward pressure, influenced by comments from Federal Reserve (Fed) officials, which have raised the likelihood of imminent rate cuts by the US central bank. Market participants are now focused on Fed Chair Jerome Powell’s upcoming speech at Jackson Hole on Friday.
Market Movers: Australian Dollar Supported by Hawkish RBA Stance
Minneapolis Fed President Neel Kashkari suggested on Monday that it might be appropriate to discuss potential US interest rate cuts in September, citing concerns about a weakening labor market, as reported by Reuters. Additionally, Federal Reserve Bank of San Francisco President Mary Daly emphasized the need for a gradual approach to reducing borrowing costs, according to the Financial Times. Chicago Fed President Austan Goolsbee also warned against maintaining restrictive monetary policies for too long, according to CNBC.
In recent economic data, US Housing Starts declined by 6.8% in July to 1.238 million units, following a 1.1% increase in June. Conversely, the University of Michigan’s Consumer Sentiment Index rose to 67.8 in August, its first increase in five months, surpassing expectations and improving from July’s 66.4.
US Retail Sales showed a robust 1.0% month-over-month increase in July, rebounding from June’s 0.2% decline, as reported by the US Census Bureau. This figure exceeded the forecasted 0.3% rise. Additionally, Initial Jobless Claims for the week ending August 9 came in at 227,000, better than the anticipated 235,000 and down from the previous week’s 234,000.
The US headline Consumer Price Index (CPI) rose 2.9% year-over-year in July, slightly lower than the 3% increase in June and below market expectations. The Core CPI, which excludes food and energy, increased by 3.2% year-over-year, a modest drop from June’s 3.3% rise but in line with market forecasts.
Technical Analysis: AUD/USD Maintains Bullish Momentum
The Australian Dollar is trading around 0.6730 on Tuesday. According to daily chart analysis, the AUD/USD pair is moving upwards within an ascending channel, indicating a bullish trend. The 14-day Relative Strength Index (RSI) is also rising toward the 70 mark, reinforcing this momentum.
On the upside, the AUD/USD pair may target the upper boundary of the ascending channel near the 0.6760 level. A breakout above this channel could push the pair toward its seven-month high of 0.6798, last reached on July 11.
For support, the nine-day Exponential Moving Average (EMA) at 0.6648 serves as a crucial support level at the lower boundary of the ascending channel. A decline below this level could lead the pair to test the throwback level at 0.6575. Falling below this support zone might signal a bearish shift, potentially driving the pair toward the throwback level at 0.6470.
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