AUDUSD Keeps Making Lower Highs Despite the Recent Bullish Momentum

AUDUSD has been showing bullish momentum for three months but, the larger trend remains bearish for the Aussie, as the weekly chart shows. The USD has been retreating after the slowdown in the US economy and consumer inflation, with markets expecting two interest rate cuts by the FED this year, while the RBA on the other hand, hasn’t is still holding firm in its hawkish stance, which has been benefiting the Australian Dollar.

AUD/USD Chart Weekly – Heading for the 100 SMA

AUD/USD has been on a bearish trend since 2020 after briefly peaking above 0.80 and continues to make lower highs, which confirms the downtrend despite the recent bullish momentum. The price moved above the 50 weekly SMA (yellow) on April, which then turned into support. Early this month we also saw a break of the 100 simple MA (green), but the 100 smooth MA (red) is still waiting above.

AUD Strength Driven by Market Sentiment

The Australian Dollar (AUD) continues to gain strength, largely due to the risk-on sentiment prevailing in financial markets. This positive sentiment is reflected in the upward trend in stocks and US economic data that supports the possibility of at least two rate cuts by the Federal Reserve without indicating recessionary risks.

FED and RBA Monetary Policy Impact

On the monetary policy front, the AUD was bolstered by a robust monthly CPI report last month. However, expectations shifted quickly when RBA Governor Hauser dampened hopes, expressing a preference for keeping interest rates steady for a longer duration. That’s a bullish hint as well. Last week the US CPI report for June showed another slowdown, which confirmed that inflation is on a slowing trend, despite the bump in Q1, also confirming two rate cuts by the FED this year.

Retail Sales Boost

Australia’s strong retail sales figures for May, which rose by 0.6%, have also contributed to the positive outlook for the AUD. The Australian Bureau of Statistics attributed this increase to cautious consumers taking advantage of early end-of-year promotions and sales events. They noted that retail businesses heavily depend on discounts and sales to drive discretionary spending, which has been subdued in recent months. This was further confirmed by last week’s Westpac Consumer Sentiment report, which showed a 1.1% decline in June.

AUD/USD Live Chart