**AUD/USD Falls Below 0.6500 as Markets Await Federal Reserve Signals and Monitor Rising Geopolitical Risks**
*(Inspired by and referencing an article by Gilberto D. Silva at FXDailyReport.com)*
The Australian dollar (AUD) slipped beneath the critical 0.6500 support level against the US dollar (USD) in early June 2024, reflecting growing caution among currency traders. This downward momentum stems from a blend of anticipation over upcoming Federal Reserve announcements, shifting expectations for US interest rates, and escalating geopolitical uncertainties worldwide.
This comprehensive analysis explores the main drivers behind the AUD/USD’s recent weakness, includes updated insights from additional reputable sources, and offers a detailed look at the factors shaping the pair’s short- and medium-term outlook.
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**1. Recent AUD/USD Performance and Technical Picture**
– In the first week of June 2024, the AUD/USD pair broke decisively below the psychological barrier of 0.6500.
– The pair’s retreat came on the heels of a broader rally in the US dollar, which regained ground against major currencies due to a risk-off sentiment and expectations for a longer period of high US interest rates.
– Technical analysis during this period showed:
– The 0.6500 level, previously a significant support, turned into resistance.
– The pair traded well below its 50-day and 200-day moving averages, signaling a bearish trend.
– Key technical supports are seen near 0.6460 and then around the yearly low near 0.6400.
– Resistance levels include the former support near 0.6500 and then 0.6550 if a rebound materializes.
– Daily relative strength index (RSI) readings dropped toward oversold territory, but without a clear reversal signal.
– Short-term momentum tracked lower highs and lower lows, reinforcing seller dominance.
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**2. Federal Reserve Policy in Focus: Implications for the US Dollar**
A primary driver behind currency moves in early June was market positioning ahead of a closely watched Federal Reserve (Fed) interest rate decision. As global investors monitored updates from the central bank, the following themes emerged:
– Recent US data, including robust employment figures and persistently high inflation indicators, has kept traders wary of any imminent interest rate cuts by the Fed.
– In May, US consumer price index (CPI) data surprised slightly to the upside, maintaining pressure on policymakers to avoid premature monetary easing.
– Fed officials, including Chair Jerome Powell, have reiterated the message that rate cuts would not proceed until inflation shows clear signs of returning toward the 2 percent target.
– Market-implied probabilities for a Fed rate cut in the third quarter of 2024 have diminished from earlier in the year.
– Higher-for-longer rates in the US encourage capital inflows into US assets, thus supporting the US dollar versus risk-sensitive counterparts, such as the Australian dollar.
**Summary of current Fed themes:**
– Strong economic data temp
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