Australian dollar slips 1.2% amid stronger us dollar and diminished fed rate cut hopes

Daily Currency Update

Last week, the Australian dollar saw a noticeable decline against the US dollar, dropping by around 1.2% as global currency markets reacted to shifting economic signals. The AUD started the week trading near US $0.654 but steadily lost ground, reaching a two-month low of approximately US $0.641 by midweek. This weakness was primarily driven by renewed strength in the US dollar, which benefited from investors scaling back expectations of a near-term interest rate cut by the Federal Reserve. Persistent inflation concerns in the US and cautious remarks from Fed officials suggested that monetary easing may be delayed, making the US dollar more attractive to investors. Although the Australian dollar staged a modest rebound later in the week, closing near US \$0.649, it remained under pressure amid broader risk-off sentiment. In contrast to the firm stance from the Fed, the Reserve Bank of Australia held its policy rate steady, which did little to support the Aussie in the face of a strengthening greenback. Overall, the week highlighted how global monetary policy divergence and shifting risk sentiment continue to shape AUD/USD dynamics.

This week, the Australian dollar is expected to remain under pressure, with the AUD/USD pair likely to trade within a bearish-to-neutral range between 0.6400 and 0.6500. The primary driver behind the Aussie’s weakness is the renewed strength of the US dollar, which has gained momentum as markets scale back expectations of a Federal Reserve rate cut in September. Attention is focused on Fed Chair Jerome Powell’s upcoming remarks at the Jackson Hole symposium, which could further shape rate expectations. In the meantime, the Australian dollar is hovering just above critical technical support near 0.6450—a level that, if broken, could trigger a deeper decline toward 0.6420 or even lower. Despite the bearish backdrop, some short-term technical indicators, such as the RSI, are entering oversold territory, suggesting a possible bounce or brief consolidation. However, any upside is expected to be limited, with resistance near 0.6500–0.6540, unless there is a clear shift in US monetary policy tone or a weakening of the greenback. Overall, sentiment remains cautious, and the path of least resistance for the AUD continues to tilt downward.