**AUD/USD Forex Update: 24/07 Rally Gains Momentum**
*Based on the original article by Crispus Nyaga, with additional insights incorporated.*
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### The AUD/USD Pair: Recent Performance and Critical Analysis
The Australian dollar (AUD) has exhibited sustained strength against the US dollar (USD) throughout July 2024, with momentum picking up further in the third week of the month. This rally is notable against the backdrop of key global economic data, central bank policy expectations, and changing risk sentiment. As the world’s fifth most traded currency pair, developments in AUD/USD hold significant implications for currency traders and policymakers.
#### Highlights of the AUD/USD Rally
– **Peak Levels**: The AUD/USD pair surged to approximately 0.6750, marking its strongest performance since January 2024.
– **Weekly Progression**: This marks the third consecutive week of advances, underscoring a significant shift in the currency’s trajectory.
– **Technical Signals**: Bullish indicators are present, with price action breaking through important resistance levels, triggering further buying interest.
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### Factors Fueling the Australian Dollar Rally
Several converging factors contribute to the current strength in AUD:
#### 1. Central Bank Dynamics
– **RBA Policy**: The Reserve Bank of Australia (RBA) has adopted a cautiously hawkish stance. While rates are unchanged at 4.35 percent, the RBA emphasizes a data-dependent approach amid persistent inflation risks.
– **Fed Rate Cut Prospects**: Market participants expect the Federal Reserve to begin policy easing as soon as September 2024. Softer inflation readings and weaker employment data have increased speculation that rates in the US will start to come down, undercutting the dollar’s yield advantage over the AUD.
– **Yield Differential**: As the yield gap between US and Australian bonds narrows, investor flows into the AUD become more attractive.
#### 2. Economic Data
– **Australian Economy**:
– Employment: Australian labor market data for July indicated steady, though not runaway, job creation, calming fears of overheating but also allaying recession concerns.
– Retail Sales: Consumer spending has demonstrated resilience, reinforcing the notion that the Australian economy remains robust even under higher interest rates.
– **US Economy**:
– Inflation: The June CPI came in softer than expected, prompting doubts about the longevity of restrictive Federal Reserve policy.
– GDP Growth: Recent data points toward slowing US growth, reinforcing expectations of a dovish shift from the Fed.
#### 3. Risk Sentiment and Commodity Prices
– **Risk-On Sentiment**: Global equity markets have rebounded, and risk appetite remains strong. As a pro-cyclical and commodity-linked currency, the AUD tends to benefit from such periods.
– **Commodities**: Australia’s terms of trade remain strong due to elevated prices for iron ore, coal, and liquefied natural gas, supporting the currency as export earnings rise.
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