Aussie Dollar Nears 0.7000 as Fed Hike Bets Ease

Key Moments

Dollar Weakness Supports AUD Recovery

The Australian Dollar is firmer at the start of the week, with AUD/USD trading about 0.12% higher near 0.6995 against the US Dollar during the Asian session on Monday. The pair has recovered from a weak opening as selling pressure hits the Greenback amid growing conviction that the Federal Reserve will keep interest rates steady at its policy meeting later this month.

At the time of writing, the US Dollar Index (DXY) – which tracks the performance of the Greenback against a basket of six major currencies – is marginally lower around 100.70. This follows a sharp retreat after an initially strong start.

Fed Expectations Shift After Softer US Inflation

Data from the CME FedWatch tool show that the probability of the Fed leaving interest rates unchanged at the July meeting stands at 85.6%, up from 65.8% recorded last week. Market participants became more confident that the central bank will maintain current policy settings after June US Consumer Price Index (CPI) figures indicated easing inflation pressures.

Australian Dollar Outperforms After PBOC Decision

On the Australian Dollar side, the currency has been outperforming major counterparts following the latest monetary policy decision from the People’s Bank of China (PBOC). The PBOC left its Prime Lending Rates (PLRs) unchanged, a move that has coincided with stronger relative performance in the AUD.

AUD/USD Technical Overview

AUD/USD is trading near 0.6990 at press time, maintaining a mildly bullish short-term tone as it holds above the 20-day exponential moving average (EMA) at 0.6970. The pair has reclaimed this key short-term trend gauge after weakness seen in late June. The 14-period Relative Strength Index (RSI) sits at 51.8, just above the neutral 50 level, pointing to steady rather than aggressive upside momentum.

On the downside, initial support is seen at the 20-day EMA near 0.6970, which is expected to serve as the first key area on any corrective move. Below that, recent lows just under 0.6950 come into focus if sellers reassert control. A break beneath 0.6950 would put the March 30 low at 0.6874 in play as a major support level.

As long as the spot rate remains above the 0.6970 region on a daily closing basis, the technical backdrop is likely to stay mildly positive. On the topside, a sustained move above the July 15 peak at 0.7021 could open the way for an extension toward 0.7100.