Aussie dollar rebounds amid softer USD, eyes on Powell and Aussie CPI
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Daily Currency Update
The AUD/USD pair has reversed its earlier losses and is trading near the US$0.6590 mark during the European session on Monday, buoyed by renewed demand for the Australian dollar (AUD), as the US dollar (USD) shows signs of fatigue. The greenback is struggling to extend its recent three-day winning streak, as market participants adopt a cautious stance ahead of a high-impact speech from Federal Reserve (Fed) Chair Jerome Powell, scheduled for Tuesday.Powell’s remarks will be closely scrutinised for any fresh clues on the Fed’s monetary policy trajectory, especially in light of recent economic data that has shown resilience in the US economy but mixed signals on inflation. Traders remain divided on whether the Fed will maintain its hawkish stance or start laying the groundwork for a pivot in 2024.
In the meantime, attention will also turn to domestic developments in Australia, with the release of the Monthly Consumer Price Index (CPI) for August, due on Wednesday. Consensus estimates suggest the headline inflation rate will hold steady at an annual pace of 2.8%. A hotter-than-expected reading could reinforce concerns about lingering inflationary pressures and potentially limit the Reserve Bank of Australia's (RBA) room to ease monetary policy further.
While the RBA held rates steady at its last meeting, policymakers have kept the door open for future hikes, should inflation prove more persistent than anticipated. As such, this week’s CPI data will be a key input for markets assessing the timing and likelihood of any policy moves in the coming months.
Technically, the AUD/USD pair is attempting to build on its intraday recovery, with immediate resistance seen near the psychological US$0.66 level. A sustained move above this threshold could open the door to further gains, especially if risk sentiment continues to improve or US yields retreat. On the downside, support remains around the US$0.6550 area, a break below which could reintroduce selling pressure.
Overall, the AUD/USD remains sensitive to both US monetary policy expectations and domestic economic indicators. As a result, volatility could remain elevated in the coming days as traders react to upcoming catalysts from both sides of the Pacific.
Key Movers
The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, is trading marginally lower near 97.55 in early Tuesday trade. The pullback comes after several sessions of firm gains, as traders lock in profits and adopt a wait-and-see approach ahead of a closely watched speech by Federal Reserve Chair Jerome Powell later in the day.The US dollar’s recent strength was underpinned by last Wednesday’s Federal Open Market Committee (FOMC) decision, in which the Fed lowered its benchmark interest rate by 25 basis points, bringing the federal funds target range to 4.00%–4.25%. The rate cut, while widely expected, was accompanied by a notable shift in forward guidance. Policymakers signalled the possibility of two additional rate cuts before the end of the year, citing softening economic conditions and a need to support growth.
Despite these dovish undertones, the market response has been mixed, as inflation in the United States remains elevated and well above the Fed’s 2% target. Core price pressures, particularly in services, continue to show resilience, raising questions about how far the central bank is willing to loosen monetary conditions without risking a reacceleration in inflation. Against this backdrop, all eyes are on Powell’s upcoming remarks for further clarity.
Investors will be listening closely for any nuanced language regarding the Fed’s assessment of inflation dynamics, the labour market, and whether incoming data might alter the current rate path. A more cautious or data-dependent tone could temper expectations for aggressive rate cuts, potentially offering renewed support to the dollar. Conversely, confirmation of the Fed’s dovish pivot may weigh further on the Greenback and fuel increased volatility across FX markets.
From a technical perspective, the DXY faces near-term resistance around the 97.80–98.00 region, a break above which could open the door toward the psychological 98.50 level. On the downside, initial support lies near 97.30, followed by the more critical 97.00 mark. With monetary policy in flux and inflation still a major concern, Powell’s speech could be pivotal in shaping near-term USD sentiment. Traders are also likely to monitor key U.S. data releases later in the week, including core PCE inflation and personal spending figures, for further confirmation of the Fed’s policy trajectory.
Expected Ranges
- AUD/USD: 0.6500 - 0.6700 ▲
- AUD/EUR: 0.5500 - 0.5700 ▲
- GBP/AUD: 2.0400 - 2.0600 ▼
- AUD/NZD: 1.1100 - 1.1300 ▲
- AUD/CAD: 0.9000 - 0.9200 ▼