Australian Dollar Outlook: AUD/USD Rally Stalls Ahead of June High

Australian Dollar Outlook: AUD/USD

The recent rally in AUD/USD appears to have stalled ahead of the June high (0.6900) as it gives back the advance following the larger-than-expected slowdown in the US Consumer Price Index (CPI), with the Relative Strength Index (RSI) reflecting a similar dynamic as it reverses ahead of overbought territory.

Australian Dollar Outlook: AUD/USD Rally Stalls Ahead of June High

AUD/USD depreciates for the third consecutive day after showing a limited reaction to the Reserve Bank of Australia (RBA) Minutes, but the exchange rate may continue to pare the advance from the monthly low (0.6599) as it seems to be tracking the June range.

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Australia Economic Calendar

FOREX.com Economic Calendar

Looking ahead, the update to Australia’s Employment report may curb the recent weakness in AUD/USD as the economy is anticipated to add 15.0K jobs in June, and ongoing signs of a tight labor market may push the RBA to implement higher interest rates as ‘inflation was forecast to remain above target for an extended period.’

The transcript of the June meeting suggests the RBA will pursue a more restrictive policy as ‘members agreed that some further tightening of monetary policy may be required to bring inflation back to target within a reasonable timeframe,’ but a dismal development may keep Governor Philip Lowe and Co. on the sidelines as ‘members observed that there was considerable uncertainty about the resilience of household consumption.’

Source: CME

In turn, AUD/USD may face headwinds ahead of the Federal Reserve interest rate decision on July 26 as the CME FedWatch Tool reflects a greater than 90% probability for a 25bp rate-hike, and it remains to be seen if the Federal Open Market Committee (FOMC) will adjust the forward guidance for monetary policy amid signs of easing inflation.

With that said, Australia’s Employment report may sway AUD/USD amid expectations for a further improvement in the labor market, but the failed attempt to test the June high (0.6900) may lead to a larger pullback in the exchange rate as its snaps the series of higher highs and lows from last week.

Australian Dollar Price Chart – AUD/USD Daily

Chart Prepared by David Song, Strategist; AUD/USD on TradingView

• The recent advance in AUD/USD seems to have stalled amid the failed attempt to test the June high (0.6900), with the Relative Strength Index (RSI) reflecting a similar dynamic as it reverses ahead of overbought territory.
• Failure to hold above the 0.6780 (38.2% Fibonacci retracement) to 0.6820 (23.6% Fibonacci retracement) region may push AUD/USD towards 0.6660 (50% Fibonacci retracement), with the next area of interest coming in around the 0.6600 (23.6% Fibonacci retracement) handle.
• Failure to defend the monthly low (0.6599) opens up the 0.6510 (38.2% Fibonacci retracement) to 0.6550 (61.8% Fibonacci retracement) area, but AUD/USD may stage further attempts to test the June high (0.6900) if it continues to hold above the weekly low (0.6788).

Additional Market Outlooks

Gold Price Vulnerable After Failing to Test June High

USD/JPY Reverses Ahead of 200-Day SMA to Halt Six-Day Selloff

--- Written by David Song, Strategist

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