- Jastrzębi Ton Fed Powell limits losses in American dollars, because markets still value in a reduction in the September rate, providing transient support for the profitability of the US Treasury.
- Australian inflation softens, increasing expectations regarding the reduction of the RBA rate in July.
- Aud/USD floats around 0.6500 when traders expect more fundamental drivers.
The Australian dollar (AUD) is determined in relation to the US dollar (USD), after a two -day rally, which raised Aud/USD above 0.6500.
After the risk of risk moods to the markets after Tuesday’s confirmation of the suspension of weapons between Israel and Iran, the Australian dollar benefited from soothing geopolitical tensions.
However, that prices are now recovering above the 200-day straight movable average (SMA), the stubborn shoot can start to lose the pair. Because technical and basic factors contribute to the price, the relative results of both economies and the expectations of the interest rate have returned to focus.
Monthly data of the Australian consumer price indicator (CPI), published on Wednesday, revealed that price pressure is still soothing.
While analysts expected that the annual inflation rate would raise by 2.3% in May, the actual number printed at 2.1%.
Australian monthly inflation data table for July 2024 – May 2025 – Source FxStreet
Soft inflation print aroused the expectations that the Reserve Bank of Australia (RBA) would announce another reduction in the rate in July.
Then the attention moved to the United States, where the markets waited for the next comments of the chairman of the Federal Reserve (Fed) Jerome Powell.
As Powell testified before the American Senate Commission for banking, apartments and urban matters, he was still sanguine about the US economy. His comments, from Tuesday and Wednesdays, have not done much to change the expected trajectory of interest rates, at least not yet. This leaves expectations as to the reduction of the FED rate for September, which provided some support for the American dollar and the profitability of the treasury.
Although the divergent monetary policy should raise the American dollar, the current economic uncertainty and weaker economic data limit its profits.
Aud/USD floats around 0.6500 and the prices remain within the growing wedge
From a technical point of view, Aud/USD still trades within the growing Klin formation on the daily table.
Prices are currently testing an vital zone of technical confluence around the key psychological level of 0.6500. Support is created on a 10-day straight movable average (SMA) at 0.6490, which is in line with the lower limit of the Klin pattern pattern.
A clear level of 0.6500 levels could see bulls striving for a re-test 61.80% of the level of recovery of Fibonacci in a decline in September-April near 0.6550.
However, if the bears of the shoot are built, the traffic below the raise in the support of the trend line may observe a deeper withdrawal to the middle point of the above -mentioned movement at the level of 0.6428.
Australian dollar questions
One of the most vital factors of the Australian dollar (AUD) is the level of interest rates determined by the Reserve Bank of Australia (RBA). Because Australia is a country luxurious in resources, another key driver is the price of its greatest export, iron ore. The health of the Chinese economy, its largest trade partner, is a factor, as well as inflation in Australia, growth rate and commercial balance. Market sentiments-not meaninglessly from whether investors take more risky assets (risk) or are looking for safe-havens (risk)-there is also a factor and a positive risk for AUD.
Bank Reserve Australia (RBA) affects the Australian dollar (AUD), setting the level of interest rates that Australian banks can borrow each other. This affects the level of interest rates in the economy as a whole. The main goal of RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other main central banks support Aud and contrary to relatively low. RBA can also employ quantitative alleviation and tightening to affect credit conditions, with a former negative Aud and the second positive Aud.
China is the largest trading partner in Australia, so the health of the Chinese economy has a enormous impact on the value of the Australian dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, raising the demand for Aud and increasing its value. On the contrary, when the Chinese economy does not grow as swift as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its steam.
The ore of iron is the largest export in Australia, which is $ 118 billion a year according to the details of 2021, and China as the main destination. Therefore, the price of iron ore can be the driving force of the Australian dollar. Basically, if the price of iron ore increases, the audience also increases, as the aggregate demand for currency increases. Otherwise, the price of iron ore will fall. Higher prices of iron ore also cause a greater probability of a positive trade balance for Australia, which is also positive for AUD.
The commercial balance, which is the difference between what the country earns on exports compared to what it pays for imports is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought after export, its currency will gain value only from the surplus of demand created by foreign buyers who want to buy exports compared to what it spends on buying imports. Therefore, a positive net trade balance strengthens Aud, with reverse effect if the trade balance is negative.
