**AUD/USD Holds Near July Lows Ahead of Fed Rate Decision**
*Article compiled using original reporting by FXStreet’s Abigail Ng, with additional analysis*
**Overview:**
The Australian Dollar (AUD) continues to face selling pressure, trading at its lowest levels since early July, as traders brace for a key interest rate decision from the United States Federal Reserve. The AUD/USD currency pair has remained under pressure following a series of US data releases, growing risk aversion, and anticipation over the Federal Reserve’s next monetary policy move. This article delves into recent price action, the factors pressuring the Aussie, key data impacting the market, technical levels to watch, and market expectations surrounding central bank policy.
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### Recent Price Action
– As of the latest trading session, AUD/USD is hovering near 0.6640 after briefly touching fresh July lows around 0.6625.
– The currency pair has been in a clear downward trend since the beginning of the month, slipping by over a cent from mid-July highs near 0.6770.
– Weakness in the Aussie accelerated after softer-than-expected inflation data from Australia, suggesting less urgency for further rate hikes from the Reserve Bank of Australia (RBA).
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### Key Factors Behind AUD/USD Decline
#### 1. **US Dollar Strength**
– The US Dollar Index (DXY) has climbed steadily as investors price in the likelihood of the Federal Reserve keeping interest rates elevated for longer.
– Safe-haven flows into the dollar have been boosted by risk-off sentiment across global markets, especially with mounting concerns around tech earnings and geopolitical tensions.
#### 2. **Australian Data Disappoints**
– Recent inflation figures from Australia showed headline CPI rising 4.0% year-on-year in the second quarter, easing more than expected from 4.1% previously.
– Core inflation also slowed, signaling that domestic price pressures may have peaked, reducing expectations that the RBA will raise rates further.
– Retail sales data from Australia additionally disappointed, hinting at subdued consumer spending as higher rates bite into household budgets.
#### 3. **Soft Commodity Prices**
– The Australian economy, heavily reliant on commodity exports like iron ore, coal, and liquefied natural gas, has felt the pinch as prices for some of these goods have moderated from earlier peaks.
– China’s persistent economic headwinds and sluggish stimulus efforts have contributed to weaker demand for Australian exports, further pressuring the AUD.
#### 4. **Risk Sentiment and Global Factors**
– Global equity markets have faced bouts of volatility, spurred by concerns over higher borrowing costs, soft economic momentum in Europe and China, and profit warnings from tech companies.
– The Australian dollar, often viewed as a proxy for risk appetite and the Chinese economy, tends to underperform during periods of heightened market uncertainty.
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### Upcoming Focus: The Federal Reserve Rate Decision
#### **Expectations for the FOMC**
– The market’s attention is now square
Read more on AUD/USD trading.