**US Dollar Slides Against Major Currencies While Australian Dollar Strengthens After Hawkish RBA Update**
*Adapted, expanded, and credited to InvestingLive’s analysis by Markos Papadopoulos*
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### Dollar Continues to Soften Amid Varied Central Bank Signals
The foreign exchange (forex) market witnessed pronounced shifts recently as the US dollar weakened against several of its key peers. At the same time, the Australian dollar advanced, buoyed by a notably hawkish Reserve Bank of Australia (RBA). These moves come as traders digest signals from central banks, adjust their monetary policy expectations, and respond to macroeconomic data.
#### Key Developments in Global FX
– **US Dollar (USD) Declines Broadly:** The greenback has lost ground against the euro (EUR), British pound (GBP), and Japanese yen (JPY). The Dollar Index (DXY), which tracks the USD against a basket of major currencies, has pulled back as markets assess softer US economic data and the outlook for Federal Reserve policy.
– **Australian Dollar (AUD) Surges:** The AUD/USD pair rallied significantly following the RBA’s latest policy decision. The RBA’s relatively hawkish outlook injected confidence in the Aussie, prompting traders to price in prolonged or additional rate hikes.
Let’s examine the factors behind these moves, the technical setups, and insights from other reputable sources to better understand this volatile landscape.
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### US Dollar Weakness: Underlying Catalysts
Several factors have conspired to dampen the short-term momentum of the US dollar:
**1. Fed’s Policy Pause and Cautious Language**
– The Federal Reserve has signaled a pause in its interest rate hiking cycle, maintaining current policy settings while keeping the door open for adjustments if inflation does not moderate.
– Recent US economic data, such as softer labor market reports and moderating inflation, have reinforced expectations that the Fed might maintain rates for longer rather than resume hiking.
**2. Shifting Market Expectations**
– Markets are increasingly betting on rate cuts in 2024, even as some FOMC members maintain a cautious note.
– Continued improvements in supply chains and signs of inflation trending toward the Fed’s 2 percent target have supported the dovish sentiment.
**3. Technical Deterioration for USD**
– The DXY failed to hold above key resistance levels, and technical selling accelerated after breaking short-term support zones.
– Loss of upward momentum is evident on daily charts across several pairs, including EUR/USD and GBP/USD.
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### Spotlight on Major Currency Pairs
#### EUR/USD: Euro Gains as US Dollar Falters
– The EUR/USD pair reclaimed the 1.0900 level, boosted by a softer dollar and reasonably stable eurozone data.
– Eurozone inflation, while moderated, has not dropped as rapidly as in the US, curbing immediate expectations for European Central Bank (ECB) rate cuts.
– Technicals show support at 1.0860 and resistance
Read more on AUD/USD trading.