The Australian Dollar (AUD) has seen a recent uptick against the US Dollar (USD) following positive domestic economic data. The Westpac Consumer Confidence in Australia rose by 2.8% in August, reversing a decline observed in July. Additionally, the Wage Price Index remained steady with a 0.8% rise in the second quarter. These factors have contributed to the bullish sentiment surrounding the Reserve Bank of Australia (RBA) and the AUD/USD pair.
The US Dollar is facing pressure due to expectations of a potential interest rate cut by the Federal Reserve (Fed) in September. However, chances of a 50-basis point rate cut have diminished, providing relief for the USD. Traders will be closely watching US producer inflation data and consumer inflation figures to gauge the stability of price growth in the US economy.
Reserve Bank of Australia Deputy Governor Andrew Hauser recently attributed persistent inflation to weaker supply and a tight labor market, leading to uncertainty in economic forecasts. Safe-haven flows amid increased geopolitical tensions in the Middle East could potentially restrain the upside of the risk-sensitive AUD. However, Federal Reserve Governor Michelle Bowman’s remarks on upside risks for inflation and strength in the labor market suggest that the Fed may not be ready to cut rates in September.
China’s Consumer Price Index (CPI) exceeded expectations in July, further adding to the global economic landscape. Westpac has updated its RBA forecast, anticipating the first rate cut in February 2025 and revising the terminal rate forecast. The RBA has adopted a more cautious approach, emphasizing the need for stronger evidence before considering rate cuts.
Technical analysis indicates that the AUD/USD pair is trading within an ascending channel, suggesting a bullish bias. The pair faces immediate support at the throwback level of 0.6575, with potential resistance at the upper boundary of the ascending channel at 0.6660. A breakout above this level could lead the pair towards its six-month high of 0.6798.
The AUD has shown strength against major currencies, with the Australian Dollar being the strongest against the Swiss Franc. The heat map displays the percentage changes of major currencies against each other, providing a comprehensive overview of the current market dynamics. Overall, the Australian Dollar’s positive performance reflects the evolving economic landscape and central bank policies influencing currency movements.
