Australian Dollar recovers losses as US Dollar struggles due to lower yields

  • The Australian Dollar recovered its daily losses as the US Dollar declined due to lower US yields.
  • The Aussie Dollar receives support from the RBA’s hawkish stance on interest rate trajectory.
  • The US Dollar may limit its downside as Fed officials delay the timing of the first interest rate cut in 2024.

The Australian Dollar (AUD) recovers its intraday losses as the US Dollar (USD) depreciates due to the decline in the yields on US Treasury bonds on Monday. The upside in the AUD/USD pair could be reinforced by the hawkish stance of the Reserve Bank of Australia (RBA). The RBA Governor Michele Bullock said during her latest press conference that the Board discussed potential rate hikes, dismissing considerations of rate cuts in the near term, as per ABC News.

The US Dollar may limit its downside as the higher-than-expected US Purchasing Managers Index (PMI) from Friday boosted the speculation of delaying the expected timing of the first interest rate cut this year. According to the CME FedWatch Tool, investors are pricing in nearly 65.9% odds of a Fed rate cut in September, compared to 70.2% a week earlier.

Daily Digest Market Movers: Australian Dollar declines due to hawkish Fed

  • The ASX 200 Index fell below 7,750 on Monday, relinquishing some of the gains from the previous session. This decline follows a weak lead from Wall Street, where Nvidia and other artificial intelligence-related chip stocks faced heavy selling after a strong run.
  • The People’s Bank of China injected 50 billion Yuan via seven-day reverse repos, maintaining the reverse repo rate at 1.8%. Any change in the Chinese economy could impact the Australian market, as China and Australia are close trade partners.
  • Investors are likely to be cautious ahead of this week’s Australian inflation data. Markets have significantly reduced their expectations for a RBA’s rate cut this year, with an easing not anticipated until April next year.
  • On Friday, the US Composite PMI for June surpassed expectations, rising to 54.6 from May’s reading of 54.5. This figure marked the highest level since April 2022. The Manufacturing PMI increased to a reading of 51.7 from a 51.3 figure, exceeding the forecast of 51.0. Similarly, the Services PMI rose to 55.1 from 54.8 in May, beating the consensus estimate of 53.7.
  • As per a Reuters report, Fed Reserve Bank of Minneapolis President Neel Kashkari noted on Thursday that it will probably take a year or two to get inflation back to 2%.

Technical Analysis: Australian Dollar remains below 0.6650

The Australian Dollar trades around 0.6630 on Monday. Analysis of the daily chart shows a neutral bias for the AUD/USD pair as it consolidates within a rectangle formation. The 14-day Relative Strength Index (RSI) is positioned on the 50 level, further movement may give a clear directional trend.

The AUD/USD pair may find support around the 50-day Exponential Moving Average (EMA) at 0.6612, with additional support at approximately 0.6585, marking the lower boundary of a rectangle formation.

On the upside, the AUD/USD pair may encounter resistance near the upper boundary of the rectangle formation around 0.6700. Beyond that, potential resistance levels include the high of 0.6714 observed since January.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the strongest against the US Dollar.

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