AUD/USD appreciates to approximately 0.7090 during the early hours of Monday’s Asian session. US Retail Sales experienced a decline in momentum during July, decreasing by 0.6% on a month-over-month basis. RBA’s Kent indicated that the rate hikes are producing the desired effects. The AUD/USD pair is experiencing modest gains, hovering around 0.7090 in the early hours of the Asian session on Monday. The US Dollar weakens against the Australian Dollar as Federal Reserve rate hike odds fade amid weaker US economic data. Market participants prepare for the upcoming release of China’s Retail Sales and Industrial Production reports, scheduled for later on Monday. The Australian employment report for July will attract significant attention on Thursday.
Data released by the US Census Bureau on Friday indicated that US Retail Sales experienced a decline of 0.6% month-over-month in July, in contrast to a modest increase of 0.2% in June. This figure came in below market expectations of a 0.1% growth. On a yearly basis, Retail Sales registered at 5.0% in July compared to a revised figure of 6.8% (up from 6.7%). This report has tempered market expectations for a September Fed rate hike. The likelihood of a September increase has decreased from approximately 50% to 33.1% this week, as indicated by the CME FedWatch tool. Reserve Bank of Australia Assistant Governor Christopher Kent stated last week that it would require “some time for tighter monetary policy to have its full effect on economic activity and inflation,” yet noted that early evidence indicates the policy is functioning as intended. Source reported on Sunday that Israel has resumed airstrikes against Lebanon in recent days after previously scaling back its attacks in the enclave earlier this month.
Traders will pay close attention to the unfolding events related to conflicts in the Middle East. Any signs of rising tensions in the Middle East could bolster a safe-haven currency such as the Greenback and present a challenge for the pair in the near term. Analysts emphasise that the Reserve Bank of Australia’s recent communication retained a notably firm tone, observing that “the statement was hawkish and Governor Bullock declared the bank would not hesitate to act if needed.” In their perspective, this underscores the notion that policymakers are vigilant regarding inflation risks and are ready to implement further policy tightening if price pressures do not ease as anticipated. In the daily chart, AUD/USD exhibits a bullish near-term bias as the spot price remains above the 100-day simple moving average and the Bollinger middle band, indicating persistent demand during shallow pullbacks.
Price is approaching the Bollinger upper band resistance, while the Relative Strength Index (14) at 62.7 indicates solid but not excessive positive momentum, which supports the overall constructive outlook. On the topside, immediate resistance is situated at the Bollinger upper band around 0.7105, and a daily close above this threshold would pave the way for a continuation of the recent advance. On the downside, initial support is observed at the 100-day SMA around 0.7060, followed by the Bollinger middle band at 0.7026 and the lower band near 0.6945. A deeper correction in this range would likely draw in buyers and maintain the overarching bullish structure.
