The AUD/USD currency pair exploded to a new weekly high. This spike came after the release of much stronger-than-expected Australian monthly CPI print. This announcement created a flood of new buying interest for the Australian dollar. Consequently, the AUD/USD surged above the 0.6600 level during the early hours of the European session today. This positive momentum is indicative of traders’ optimism following the easing of US-China trade tensions and expectations for this week’s upcoming US macroeconomic releases.
Given that today’s Australian CPI data came in above market expectations, the AUD/USD pair picked up strong fresh bids, celebrated and rose to a major swing high. The duo had surged past the 0.6600 level. This increase is an important catalyst for optimistic investors, who are now looking for even bigger returns. The AUD/USD pair is approaching the 200-hour Simple Moving Average (SMA) indicator. Meanwhile, if it manages to climb above this level, it may surge up to the 0.6655 area, aligning with the 61.8% Fibonacci retracement level.
According to some market analysts, the AUD/USD pair still has enough upside potential to retest its year-to-date high. Should buying pressure remain it might even try again to pierce the psychological barrier of 0.6700. As the pair approaches the 0.6625-0.6630 area, it runs into resistance. This indicates that speculative traders are playing it safe given the current backdrop of the overall markets.
The 0.6580 mark will be the key support zone to watch for the AUD/USD pair. This floor provides important protection against near-term downside risks. If the pair falls below this mark, it risks resuming a one-week-old downward trend, potentially testing the 0.6550 intermediate support level. Continuing lower would bring the pair towards the psychological barrier of 0.6500 should it break through 0.6550.
In recent comments, Federal Reserve Chair Jerome Powell indicated that while interest rate adjustments are necessary, easing too aggressively could jeopardize efforts to control inflation. His comments raised expectations that the Fed would stop cutting interest rates any time soon. This is a key decision that will have a major impact on the future direction of the AUD/USD pair. Powell’s attempt to temper expectations regarding aggressive rate reductions has contributed to a complex trading environment for this currency pair.
At the same time, RBA interest rate speculation continues to be relevant. Market analysts are betting on the RBA to hold interest rates unchanged in its next meeting. This decision comes in the context of surging inflation measures. This expectation gives even more legs to the Australian dollar’s surge against the US currency.
A lessening of trade tensions between the US and China has helped sentiment toward the Aussie dollar. This unexpected turnaround is a positive tailwind for the AUD/USD pair. With all this uncertainty, traders are on high alert this week. They’re sitting on the sidelines, hesitant to make any large, bullish bets while waiting for key US macroeconomic data releases. These economic indicators will play a surprisingly large role in determining the near-term dynamics for the USD. In turn, this means they will dictate the AUD/USD trading environment.