The Australian dollar ended the week at its highest level since January as markets bet on a dovish Fed

The AUD/USD pair remains at its highest level since January, around 0.6800.
Hot PPI data did not stop the pair’s upward trend.
RBA and Fed monetary policy divergences cause confusion

The Australian Dollar (AUD) maintained its positive trajectory against the USD in Friday’s session, rising 0.30% to 0.6780. The AUD resumed its gains with market participants adjusting their bets on the Federal Reserve (Fed) following the release of US inflation data. Hot Producer Price Index (PPI) data from the United States failed to spark a revival in the Greenback.

The Reserve Bank of Australia (RBA) is likely to be among the last G10 central banks to initiate interest rate cuts, which could prolong the AUD’s gains.

Daily Market Moves: AUD set to continue gains as RBA delays cuts and markets gain confidence in Fed’s more dovish policy

In terms of economic data, the Producer Price Index (PPI) for final demand in the US rose 2.6% year over year in June, according to data released on Friday by the US Bureau of Labor Statistics.
The result was higher than the forecast of 2.3%, surpassing the previous boost of 2.2% in May. Core PPI also exceeded market expectations of 3%.
However, the University of Michigan sentiment figure came in at 66.0, which was lower than expected, down from the predicted 68.5 and the previous 68.2.
The CME Fedwatch tool forecasts that the probability of a 25 basis point cut in September is greater than 80%.
On the other hand, speculation is growing that the RBA may delay the global rate cut cycle or even raise rates again as a result of high inflation in Australia. This view is forcing the RBA to maintain a hawkish stance.
Furthermore, China, one of Australia’s closest trading partners, released its trade balance data for June, showing a trade surplus of $99.05 billion, a significant boost from the previous figure of $82.62 billion.

Technical Analysis: AUD/USD Holds at Highs, Signs of an Approaching Correction

The AUD/USD pair remains bullish, holding onto the highs reached in January. However, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are indicating that they are approaching overbought territory, suggesting a possible correction is coming.

Buyers are looking to maintain the 0.6760-0.6780 range and break above the 0.6800 area if possible. Conversely, the 0.6670, 0.6650 and 0.6630 levels are set as support ranges in case of a correction.