The AUD/USD currency pair surged for the third consecutive trading session, climbing to 0.6550 from last week’s low of 0.6454, marking a key shift in market sentiment.
This upward move follows hawkish minutes from the Reserve Bank of Australia (RBA) and a notably restrained speech from Federal Reserve Chair Jerome Powell. The brokers at Arbitics provide a comprehensive breakdown of this topic in their article.
Hawkish RBA Minutes Fuel Aussie Dollar Strength
On Tuesday, the RBA minutes offered greater clarity on the central bank’s policy direction. Despite keeping the official cash rate steady at 3.85%, the RBA adopted a slightly hawkish tone, emphasizing its wait-and-see approach to inflationary pressures.
The board acknowledged the possibility of further rate cuts if inflation trends downward. This conditional stance, while dovish in the long term, reflects a near-term commitment to monetary policy stability and confidence in current macroeconomic conditions.
Additionally, upcoming changes to how the Australian Bureau of Statistics (ABS) reports inflation data are poised to strengthen policy responsiveness. By shifting from a quarterly CPI release to a monthly inflation report, Australia aligns itself with global standards and offers the RBA more frequent insights into price dynamics.
This change is a critical development for traders, as higher data frequency will increase the timeliness and relevance of policy signals, reducing uncertainty and potentially boosting the Australian dollar (AUD).
Powell’s Muted Tone Eases USD Bullishness
On the U.S. front, markets had anticipated potential hints on the interest rate trajectory during Jerome Powell’s latest appearance. However, the Fed Chair avoided direct commentary on monetary policy, disappointing dollar bulls.
His avoidance suggests a cautious approach, particularly amid the geopolitical risks and ongoing concerns about a possible resurgence of trade tensions reminiscent of the current administration’s policies.
The Federal Reserve has consistently emphasized its data-dependent approach, resisting premature cuts despite signs of economic softening. Traders interpreting Powell’s silence as a dovish cue initiated selling pressure on the U.S. dollar (USD), supporting further upside for the AUD/USD exchange rate.
Limited Immediate Catalysts Ahead
Looking ahead, Wednesday offers little in the way of high-impact economic releases. The U.S. existing home sales and mortgage application data may generate minor market movement. Still, they are unlikely to shift the broader interest rate outlook or significantly affect the AUD/USD pair.
As a result, the market may consolidate recent gains while maintaining a bullish bias, barring any surprise news or risk-off sentiment.
AUD/USD Technical Outlook: Momentum Favors Bulls
On the technical front, the daily chart underscores a steadily improving outlook for the AUD/USD pair. Since April, the pair has formed a bullish ascending channel, reflecting gradual strengthening of the Aussie dollar. It now trades comfortably above the 50-day and 100-day Exponential Moving Averages (EMAs), both of which act as dynamic support levels.
Importantly, the pair has approached the 61.8% Fibonacci Retracement Level, a key zone often watched by technical traders. This level aligns closely with current resistance, and a decisive break above it could catalyze a move toward the 0.6600 psychological barrier, the upper boundary of the ascending channel.
However, a note of caution arises from the MACD (Moving Average Convergence Divergence) indicator, which has formed a bearish divergence. While price action trends upward, the MACD line has been sliding, signaling potential waning momentum. Traders should monitor this signal closely, as divergence often precedes short-term pullbacks.
That said, unless a major reversal pattern emerges, the prevailing trend remains intact. Should bulls push the pair past 0.6600, the next target lies near 0.6650, where previous resistance levels could resurface.
Key Support & Resistance Levels with Bullish Short-Term Trend
Key technical levels to watch include support at 0.6520, 0.6485, and 0.6450, while resistance is seen at 0.6600, 0.6650, and 0.6700. Traders are closely monitoring indicators such as MACD divergence, exponential moving averages (EMAs), and Fibonacci retracement levels.
The short-term trend appears bullish, with a cautiously optimistic outlook for the medium term.
Final Thoughts
The AUD/USD pair’s rally this week has been powered by a combination of domestic policy clarity, expectations of frequent inflation updates, and Federal Reserve caution. These developments create a supportive environment for the Australian dollar, especially as traders await more definitive inflation figures and macroeconomic cues in both economies.
With the technical structure favoring further gains and no immediate U.S. data shocks on the horizon, the path of least resistance appears upward, though momentum indicators suggest watching for any signs of exhaustion. As always, risk management remains crucial, especially amid evolving global macro risks and central bank rhetoric.
For forex traders, staying alert to changes in yield differentials, central bank tone, and technical patterns will be essential as the AUD/USD pair navigates this crucial resistance zone.
