**Australian Dollar Short-Term Outlook: AUD/USD Bulls Eye Breakout**
*Based on analysis originally by Matt Weller, FOREX.com; additional insights included.*
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**Overview of AUD/USD’s Recent Performance**
The Australian dollar (AUD) has been the focus of significant market attention, particularly in relation to the US dollar (USD). The AUD/USD currency pair reflects broader macroeconomic shifts, commodity price movements, domestic economic data, and US Federal Reserve policy expectations.
Recently, the AUD/USD has experienced heightened volatility. As of late July 2024, the currency seems poised for a breakout, with bullish momentum building on both technical and fundamental fronts.
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**Key Factors Influencing AUD/USD**
Several interlocking factors are currently at play in the AUD/USD market:
– **Interest Rate Expectations:** Central bank policies, especially from the Reserve Bank of Australia (RBA) and the Federal Reserve, have great influence on the currency pair.
– **Commodity Prices:** Australia’s economic reliance on commodity exports, particularly iron ore and coal, tightly links the AUD to fluctuations in commodity markets.
– **Chinese Economic Performance:** As China is Australia’s largest trade partner, Chinese economic data and stimulus measures directly impact AUD/USD.
– **Risk Sentiment:** The Australian dollar is considered a ‘risk-on’ currency. Global equity market sentiment, emerging market dynamics, and geopolitical stability contribute to AUD/USD moves.
– **US Dollar Trends:** Dollar strength or weakness, especially tied to inflation data and Federal Reserve policy, sets the overall backdrop for the AUD/USD exchange rate.
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**Recent Developments Supporting the AUD**
1. **Rebounding Commodity Prices**
– Iron ore and coal prices climbed back after weathering earlier dips.
– Australian export values have improved, supporting Australia’s trade surplus and, by extension, the AUD.
– Higher commodity prices often attract foreign capital to Australian assets.
2. **Positive Australian Economic Data**
– Australia’s labor market showed continued resilience, with low unemployment keeping wage growth firm.
– Consumer spending rebounded as cost-of-living pressures moderate, and business investment has held up.
3. **Reserve Bank of Australia’s Hawkish Tone**
– Markets had priced in at least one RBA rate cut by the end of 2024, but minutes from the latest RBA meeting leaned more hawkish.
– Some RBA board members highlighted risks of stubborn inflation, suggesting rates may stay higher for longer.
– A pause or delay in easing supports the AUD by keeping yield differentials attractive.
4. **Chinese Stimulus Measures**
– China recently unveiled a fresh round of stimulus targeting infrastructure and property markets, aiming to buttress slowing growth.
– As a significant trading partner, stronger Chinese demand for Australian exports bodes well for the AUD.
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**Technical Outlook on AUD/USD**
The technical picture for the AUD/USD currency pair brings additional nuances.
– **Daily Chart Patterns**
– A clear breakout above the 200-day moving average,
Read more on AUD/USD trading.