Aussie dollar reclaims 10-month high as dovish fed expectations weigh on the Greenback

Daily Currency Update

The Australian dollar (AUD) continued its upward trajectory on Tuesday, with the AUD/USD currency pair climbing to a 10-month high near 0.6620 during the European trading session. The rally comes as the US dollar (USD) weakens broadly against major peers, pressured by growing expectations that the Federal Reserve (Fed) will begin cutting interest rates as early as next week. Market sentiment has shifted decisively in favor of a more accommodative Fed policy stance. A string of recent US economic data — including signs of moderating inflation and slowing labor market momentum — has reinforced the view that the central bank may move to ease monetary conditions in an effort to support growth and prevent a deeper economic slowdown. As a result, US Treasury yields have declined, diminishing the greenback’s relative yield advantage and bolstering demand for higher-yielding, risk-sensitive currencies like the AUD. The Australian dollar is also benefiting from external tailwinds, including firm commodity prices and improving macroeconomic signals from China — Australia's largest trading partner. Strength in industrial metals, particularly iron ore, is providing further support to the Aussie, given Australia’s status as a major exporter. From a technical perspective, a sustained break above the 0.6620 resistance level could open the door for further gains, with the next key resistance seen near the 0.6670–0.6700 region. Conversely, any signs of renewed USD strength or a more hawkish-than-expected tone from the Fed could trigger a pullback. With the Fed’s policy meeting on the horizon, traders will remain focused on incoming US economic data and Fed commentary for further clues on the timing and magnitude of potential rate cuts. Until then, the AUD/USD pair is likely to remain sensitive to shifts in US rate expectations and broader risk sentiment.