Australian Dollar Pauses, Markets Await Fed Move
The Australian Dollar (AUD) traded with little movement on Tuesday after Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter spoke about the economy. Her comments suggested that Australia is getting closer to bringing inflation back to its target. She also said the risks are balanced and highlighted the importance of watching consumer spending and unemployment while monetary policy takes time to show full results.
Markets now believe there is an 86% chance that the RBA will keep interest rates unchanged in September. Strong trade data in July, better-than-expected GDP growth in the second quarter, and higher inflation numbers all support this outlook.
At the same time, the US Dollar (USD) is under pressure ahead of the Federal Reserve’s key interest rate decision on Wednesday. The US Dollar Index dropped to around 97.20 as traders waited for retail sales data. Many analysts expect the Fed to cut rates by 25 basis points, though a larger cut is still possible.
On the technical side, the AUD/USD pair is moving in an upward channel, showing a bullish trend. If the pair continues higher, it could test resistance near 0.6687 or 0.6700. On the downside, support is seen at 0.6621 and then 0.6570.
Impact:
The Australian Dollar could rise further if US economic data stays weak. However, a stronger US Dollar or surprise inflation numbers might limit AUD/USD gains.
