The AUD/USD pair gained traction on Friday, showing resilience after a minor retracement from this week’s one-month high of 0.6760. The pair is holding intraday gains, trading around 0.6725, reflecting a 0.30% increase for the day.
The US Dollar (USD) is struggling to maintain momentum following its recovery from a year-to-date low, weighed down by expectations of dovish Federal Reserve (Fed) policies. Market sentiment strongly anticipates that the Fed will initiate a policy easing cycle in September, with a 25 basis points (bps) rate cut fully priced in. Furthermore, the CME Group’s FedWatch Tool suggests a possibility of a 50 bps rate cut next month and up to 100 bps of easing by year-end.
Conversely, the Australian Dollar (AUD) benefits from the Reserve Bank of Australia’s (RBA) hawkish stance, with expectations of further interest rate hikes in response to inflation risks. This has provided additional support for the AUD/USD pair. Market participants, however, may hold off on aggressive positions until Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium. Investors are eager for guidance on future rate cuts, which will impact the USD and could offer significant directional cues.
Technically, the AUD/USD pair’s recent breakout above the 0.6600 confluence—consisting of the 100- and 200-day Simple Moving Averages (SMA)—and strength beyond the 0.6700 level has been a bullish signal. Oscillators on the daily chart remain in positive territory and are not yet in the overbought zone, suggesting the potential for further gains. The path of least resistance appears to be upward, supporting the possibility of extending the recovery from this year’s low.
To confirm further bullish momentum, the pair may need to break through the 0.6750 resistance level. Success in this area could pave the way to challenge the year-to-date peak near 0.6800 and potentially reach the December 2023 high around 0.6870.
On the downside, the 0.6700 level is expected to provide immediate support. If breached, the 0.6675 zone and the 0.6600 confluence—which now acts as support—will be key levels to watch. A decisive break below 0.6600 could lead to further declines towards the 0.6550-0.6545 support range and potentially the 0.6500 psychological level.
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