AUD/USD Analysis: Slight Dip Amid Commodity Pressure, but Bullish Outlook Remains

On Monday, July 8th, the Australian dollar (AUD) closed at $0.6737 against the US dollar (USD), down 0.18% for the day. This slight adjustment comes after the AUD/USD pair reached a six-month high of 0.6761 in Asian trading on Friday.

Key Factors Affecting the AUD/USD Pair

  1. Profit-Taking: The minor pullback on Monday can be attributed to profit-taking following Friday’s high.
  2. Commodity Pressure: A dip in commodity prices on Monday weighed on the Australian dollar.
  3. Diverging Central Bank Expectations: Despite the slight decline, the AUD’s downside appears limited due to differing rate expectations between the Reserve Bank of Australia (RBA) and the Federal Reserve.
    • Market expectations for an RBA rate hike in August: 27% probability
    • Probability of a Fed rate cut in September: 80%

Upcoming Events to Watch

  1. Fed Chair Powell’s Congressional Testimony: Tuesday/Wednesday
  2. US CPI Data: Thursday

These events could potentially stimulate further AUD gains if they indicate a likely Fed rate cut in September.

Technical Analysis

From a daily chart perspective:

  • Bullish outlook if AUD/USD closes above 0.6750 (76.4% Fibonacci retracement of the April-December downtrend from 0.6870 to 0.6361)
  • Next target: 0.6870

Key levels to watch:

  • Resistance: 0.6770, 0.6800, 0.6840
  • Support: 0.6700-10, 0.6675-80

In conclusion, while the AUD/USD pair experienced a slight dip on Monday, the overall outlook remains bullish. Traders should keep a close eye on upcoming US economic data and Fed commentary for potential catalysts that could drive the pair higher.