The AUD/USD forex pair remained relatively muted on Tuesday, hovering around 0.6500, a level that has acted as a consolidation range for several months. With limited economic events from Australia this week, traders are turning their focus to the Federal Reserve minutes and the upcoming Jackson Hole Symposium, both of which may dictate the next decisive move in the pair.
As a broker from Highmont Group, Melanie Kleiner offers an in-depth look at this subject.
RBA Interest Rate Cuts and Outlook
Last week, the Reserve Bank of Australia (RBA) announced a 0.25% interest rate cut, providing relief for households grappling with higher borrowing costs. The central bank’s dovish move reflected concerns over slowing growth and the negative impact of ongoing global trade tensions.
Economists expect at least two additional cuts this year, as the RBA attempts to stimulate consumption and investment. Without such measures, policymakers fear a deeper economic slowdown. These expectations keep the Australian dollar under persistent pressure, as rate differentials versus the US dollar widen in favor of the greenback.
US Data and Fed Meeting Minutes
Looking ahead, the AUD/USD exchange rate will react to upcoming US building permits and housing starts data. According to Reuters, consensus estimates show a slight decline, with building permits projected at 1.39 million and housing starts at 1.30 million.
While this data is moderately important, the real driver lies in the Federal Reserve’s meeting minutes. These minutes will shed light on the internal debates at the Federal Open Market Committee (FOMC), especially regarding the pace of future monetary policy tightening.
The Jackson Hole Symposium and Powell’s Stance
The highlight for the week will be the Jackson Hole Symposium, an event closely watched by financial markets. Jerome Powell, the Fed Chair, is set to deliver a keynote speech that may outline the central bank’s trajectory for the rest of the year.
Powell faces a delicate balancing act. On one hand, the US President continues to pressure the Fed for easier policy, arguing that high rates hurt US competitiveness.
On the other hand, the Fed must contend with robust inflation data. The Consumer Price Index (CPI) recently accelerated to 2.7%, while the Producer Price Index (PPI) rose to 3.6%, signaling ongoing price pressures.
Given these figures, Powell is expected to maintain a hawkish stance, keeping rate cuts off the table and reinforcing the Fed’s credibility in combating inflation. Such rhetoric typically supports the US dollar while weighing on risk-sensitive currencies like the Australian dollar.
AUD/USD Technical Analysis
From a technical analysis perspective, the AUD/USD pair has exhibited a gradual uptrend over recent months, carving out an ascending channel on the daily timeframe. Currently, the pair trades just above the lower boundary of this channel, consolidating near both the 25-day and 50-day moving averages.
However, momentum indicators point to a bearish divergence pattern. The Relative Strength Index (RSI), MACD, and Awesome Oscillator are all trending lower despite price stability. This divergence often signals weakening bullish momentum and foreshadows a potential downturn.
Key support emerges at the psychological 0.6400 level, which could serve as the next downside target if sellers regain control. On the upside, resistance lies near 0.6560. A sustained move above this zone would invalidate the bearish scenario and potentially trigger a renewed rally toward higher channel levels.
Broader Market Context
The Australian dollar remains a commodity-linked currency, sensitive to global risk sentiment and demand dynamics. With China being Australia’s largest trading partner, developments in Chinese growth and trade conditions also heavily influence AUD performance. Current headwinds, including slowing Chinese demand and the broader trade war, amplify downside risks.
At the same time, the US dollar benefits from its safe-haven status, particularly during periods of global uncertainty. Should Powell confirm a firm anti-inflationary policy stance, capital flows are likely to favor the greenback, reinforcing the bearish bias for AUD/USD.
Conclusion
The AUD/USD pair is entering a critical juncture as markets await fresh guidance from the Federal Reserve. While the RBA’s dovish policy stance weighs on the Australian dollar, the US side of the equation may soon deliver more clarity through the FOMC minutes and Powell’s speech.
Technically, the formation of a bearish divergence pattern suggests sellers may soon gain control, with the 0.6400 psychological level acting as the next key target. However, a breakout above 0.6560 would nullify this bearish view and open the door to renewed bullish momentum.
For now, traders should remain vigilant, balancing technical signals with fundamental drivers, as the Jackson Hole Symposium and US economic data are likely to set the tone for the AUD/USD trajectory in the coming weeks.
