AUD/USD Continues to Rise on Fed Rate Cut Expectations

The Australian dollar (AUD) extended its gains against the US dollar (USD) on Thursday, July 4th, closing 0.3% higher at 0.6727. This marks the second consecutive day of gains for the AUD/USD pair, following a series of weak economic data releases from the United States on Wednesday.

Key Factors Driving the AUD/USD Rally

  1. Fed Rate Cut Expectations: The weak US economic data has fueled expectations of potential interest rate cuts by the Federal Reserve, providing support for the AUD/USD pair.
  2. Diverging Central Bank Outlooks: The differing interest rate outlooks between the Reserve Bank of Australia (RBA) and the Federal Reserve are underpinning the AUD/USD. Currently, Australian 10-year bond yields are higher than their US counterparts.
  3. Commodity Price Surge: Rising commodity prices, particularly iron ore reaching a one-month high on Thursday, continue to bolster the Australian dollar.

Technical Analysis

On the daily chart, the AUD/USD has broken through the upper resistance of its previous trading range at 0.67. The pair has now closed above this level for two consecutive trading days, indicating increasing bullish momentum.

Key Levels to Watch

Resistance levels:

  • Initial resistance: 0.6730-35 (January 8-12 daily highs)
  • Further resistance: 0.6749 (76.4% Fibonacci retracement of the December-April downtrend from 0.6870 to 0.6361)

Support levels:

  • Initial support: 0.6700-05
  • Further support: 0.6675-80

Traders should keep an eye on these key levels as the AUD/USD pair continues to show strength in the current market environment.