Introduction
The AUD/USD currency pair has displayed strength recently, supported by growing expectations that the US Federal Reserve is nearing the end of its tightening cycle. This is primarily due to the softening inflation in the United States. Rate futures data from the CME FedWatch tool indicates a 96% likelihood of a final 25 basis point hike at the upcoming July 25-26 meeting. Technical charts also suggest a potential shift in the medium-term downward pressure on AUD/USD, as it tests resistance at the mid-June high of 0.6900. This article examines the implications of these developments and highlights the significant support and resistance levels to monitor.
Easing Expectations Signal Potential Upside Momentum
The AUD/USD pair has gained strength recently, bolstered by the growing anticipation that the US Federal Reserve is approaching the end of its tightening cycle. This sentiment arises from the Federal Reserve’s response to softening inflation in the United States. Traders are closely monitoring the upcoming July 25-26 meeting, where a 25 basis point hike is highly anticipated. The likelihood of this final increase stands at 96% according to rate futures data from the CME FedWatch tool. Such expectations have contributed to the resilience of the AUD/USD pair.
Technical Analysis Signals Potential Breakout
From a technical perspective, the AUD/USD pair is showing signs of diminishing downward pressure in the medium term. Earlier this month, the pair experienced a rebound near the 0.6600 level, which has provided support. Currently, it is testing a crucial resistance level at 0.6900, which represents the mid-June high. Should AUD/USD break above this level, it could signify a potential breakout towards the mid-February high of 0.7030. Traders and investors will closely watch this key resistance level to determine the direction of the pair.
Key Levels to Watch
In analyzing the AUD/USD pair, it is essential to monitor the significant support and resistance levels that could influence its trajectory. On the upside, the current resistance at 0.6900 poses a crucial level to overcome. A successful break above this level may open the door for further upward movement, initially targeting the mid-February high of 0.7030. On the downside, robust support is expected around 0.6785. This level has previously provided a strong foundation for the pair and could act as a potential support zone if a downside correction occurs.
Conclusion
The AUD/USD currency pair has displayed resilience amid growing expectations that the US Federal Reserve is reaching the conclusion of its tightening cycle. The Federal Reserve’s response to softening inflation has raised market sentiment and supported the AUD/USD pair. Furthermore, technical analysis suggests a potential shift in the medium-term downward pressure, as AUD/USD tests resistance at 0.6900. Traders will closely monitor the outcome of the upcoming July meeting to assess the Federal Reserve’s policy stance. Additionally, key support and resistance levels at 0.6785 and 0.6900, respectively, will be crucial indicators of the pair’s future direction.
