Highlights;
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The AUD/USD exchange rate has increased for four consecutive sessions, supported by a weaker USD due to expectations of a potential Federal Reserve rate cut, despite rising US PCE inflation reaching 2.9% year-over-year.
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Market anticipation remains strong for a September Fed rate cut, with nearly 90% odds priced in, potentially influenced by upcoming US employment data, which could further solidify expectations.
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AUD/USD has climbed approximately 2% from recent lows, yet remains within a range bound by 0.6400 and 0.6600, with the 200-day EMA near 0.6480 acting as a key technical level.
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Key drivers of the Australian Dollar include the Reserve Bank of Australia’s monetary policy, iron ore prices, China’s economic health, and Australia’s trade balance, all of which influence AUD’s value and market sentiment.
AUD/USD Gains for Fourth Straight Session
AUD/USD rose for the fourth consecutive session on Friday, reaching the 0.6550 level following the latest U.S. inflation data, which led to a broader decline in the U.S. Dollar (USD). The Australian Dollar (AUD) extended its rally against the Greenback, positioning AUD/USD near the upper boundary of a technical range that has largely confined the pair throughout the year.
U.S. Inflation Continues to Climb
The U.S. Personal Consumption Expenditures Price Index (PCE) rose again in the year ended in June, with core PCE hitting 2.9% year-over-year, marking the third consecutive month that key U.S. inflation metrics have moved further away from the Federal Reserve’s target of 2%. Despite these rising inflation pressures, market expectations for a Federal Reserve (Fed) rate cut in September remain high, with nearly 90% odds of a rate reduction being priced in by rate traders. The upcoming U.S. employment figures, set to be released later this month, could further solidify the case for a Fed rate cut next month.
AUD/USD Price Outlook
The Australian Dollar’s recent recovery has lifted AUD/USD by over 2% from its last swing low at 0.6415, marking gains in five of the past seven sessions. Despite this near-term bullish momentum, the pair remains trapped in a long-term consolidation pattern between 0.6400 and 0.6600. Without significant shifts in long-term sentiment, AUD/USD is expected to continue oscillating around the 200-day Exponential Moving Average (EMA) near 0.6480 in the foreseeable future.
**AUD/USD Daily Chart
(Refer to the original source for the chart)
FAQ: Australian Dollar (AUD)
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Key Drivers of the Australian Dollar (AUD): AUD is significantly influenced by the interest rates set by the Reserve Bank of Australia (RBA), the price of Iron Ore (Australia’s largest export), the health of the Chinese economy, Australia’s inflation and growth rates, and market sentiment. Positive sentiment (risk-on) tends to favor the AUD.
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RBA’s Influence on AUD: The RBA affects the AUD by setting interest rates for banks, which impacts the broader economy. High interest rates relative to other central banks support the AUD, while low rates weaken it. The RBA also uses tools like quantitative easing and tightening to influence credit conditions, with easing typically being AUD-negative and tightening AUD-positive.
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Impact of China’s Economy on AUD: As Australia’s largest trading partner, China’s economic performance heavily influences the AUD. Strong Chinese demand for Australian goods and services boosts the AUD, while weaker demand negatively impacts it.
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Iron Ore’s Role: As Australia’s largest export, iron ore prices significantly impact the AUD. Rising iron ore prices tend to strengthen the AUD, as they increase demand for the currency and improve Australia’s trade balance.
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Trade Balance’s Influence: A positive trade balance, where exports exceed imports, strengthens the AUD, while a negative balance weakens it. Australia’s exports, particularly of commodities like iron ore, play a crucial role in this dynamic.
Source: https://www.fxstreet.com/news/aud-usd-edges-into-fourth-straight-winning-day-202508291744
