The AUD/USD currency pair is showing signs of a potential rebound, trading near 0.6802 and consolidating within a sideways range at its recent highs from late August. The Australian dollar has strengthened by nearly 4% over the past month, fueled by high consumer price index figures that point to ongoing inflationary pressures in Australia. In July, Australian inflation was recorded at 3.5% year-over-year, a slight deceleration from June’s figures but still exceeding expectations of 3.4%. This strong inflation data has bolstered the Reserve Bank of Australia’s (RBA) decision to maintain a tight monetary policy stance.
Despite the challenges in effectively controlling high inflation, the RBA has opted for a watchful rather than an aggressive approach, which could potentially lead to positive outcomes in the long run. During the last RBA meeting, discussions centered around a potential interest rate hike, but the decision was ultimately made to keep rates unchanged. The RBA’s cautious approach, combined with the recent general weakness of the US dollar, has provided a solid foundation for the Australian dollar’s strength.
Technical Analysis
On the H4 chart, AUD/USD recently completed an upward wave to 0.6822, followed by a downward impulse to 0.6784. Currently, a corrective movement to 0.6816 is anticipated, potentially setting the upper limits of the consolidation range. A break below this range could initiate a new decline to 0.6760. If the price falls below this level, it could signal the start of a new downward trend towards 0.6640, with the potential for further decline to 0.6575. The MACD indicator supports this bearish scenario, with its signal line at the highs and trending downward.
On the H1 chart, the pair is forming a correction to 0.6816. After this correction, a downward movement to 0.6764 is expected, potentially extending to 0.6757. The Stochastic oscillator, currently above 80, suggests a likely decline to 20, supporting the possibility of continued downward momentum after the correction.
The Australian dollar’s performance against the US dollar will likely be influenced by a number of factors in the coming weeks and months, including the pace of inflation in both countries, the RBA’s monetary policy stance, and the overall strength of the US dollar. Investors will be closely watching these developments to gauge the direction of the AUD/USD pair.
