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- AUD/USD rises to near 0.6995 after a weak opening.
- The Fed is highly anticipated to leave interest rates unchanged in the policy meeting later this month.
- Soft US CPI data for June forced traders to pare hawkish Fed bets.
The Australian Dollar (AUD) trades 0.12% higher to near 0.6995 against the US Dollar (USD) during the Asian trading session on Monday. The AUD/USD pair bounces back after a weak opening, as the US Dollar faces selling pressure amid intensified expectations that the Federal Reserve (Fed) will not hike interest rates in the policy meeting later this month.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally lower around 100.70. The USD Index fell sharply after a strong opening move.
According to the CME FedWatch tool, the odds of the Fed leaving interest rates unchanged in the July meeting are 85.6%, up from 65.8% recorded last week. Market participants turned confident that the Fed will maintain the status quo in the July meeting after the release of the United States (US) Consumer Price Index (CPI) data for June, which showed that inflationary pressures cooled down.
On the Australian Dollar front, the currency outperforms its major peers, following the People’s Bank of China’s (PBOC) monetary policy announcement, in which it left Prime Lending Rates (PLRs) unchanged.
AUD/USD technical analysis
AUD/USD trades higher at around 0.6990 at press time, holding a modestly bullish near-term bias as it extends above the 20-day exponential moving average (EMA) at 0.6970. The pair has reclaimed this short-term trend indicator after its late-June weakness, while the Relative Strength Index (14) at 51.8 sits just above the neutral line, suggesting stabilizing upside momentum rather than aggressive buying pressure.
On the downside, immediate support is located at the 20-day EMA near 0.6970, which is likely to act as the first line of defence on any pullback, followed by the recent price troughs below 0.6950 if sellers regain control. Below 0.6950, the March 30 low at 0.6874 will be the key support level. As long as spot holds above the 0.6970 region on a daily closing basis, the technical tone should remain mildly constructive. Looking up, the pair could extend its advance towards 0.7100 if it manages to break above the July 15 high at 0.7021.
