Australian Dollar Surges to 8-Month High as US Dollar Weakens on Trade Optimism

The Australian Dollar (AUD) continued its strong upward momentum on Thursday, climbing to a fresh eight-month high of 0.6619 against the US Dollar (USD). The ongoing rally is driven by improving domestic economic indicators and weakening demand for the greenback amid positive global trade developments.

Strong PMI Data Boosts Aussie Momentum

Australia’s economic recovery gained further traction in July, with the Judo Bank/S&P Global Composite PMI rising to 53.6, the highest level since April 2022. This marks the 10th consecutive month of expansion.

• Services PMI jumped to 53.8, indicating the fastest growth in 16 months.
• Manufacturing PMI climbed to 51.6, fueled by a rebound in new orders, marking the strongest overall growth in over three years.

This encouraging data underscores a broad-based recovery across Australia’s key sectors, lending strong support to the AUD.

RBA Maintains Hawkish Tone Despite Global Uncertainty

Speaking at the Anika Foundation event in Sydney, RBA Governor Michele Bullock emphasized the importance of maintaining price stability, despite lingering uncertainties in the global economy. The central bank’s cautious optimism and a wait-and-see approach on future rate cuts have reinforced market confidence in the AUD.

While recent RBA minutes suggest further easing is on the table, the central bank appears reluctant to act hastily, preferring to await clearer signs of slowing inflation.

US Dollar Pressured by Fed Speculation and Political Unrest

The US Dollar Index (DXY) extended its decline, hovering around 97.10 amid growing political and policy-related headwinds. Treasury Secretary Scott Bessent hinted that a new Federal Reserve Chair nominee may not be announced until December or January, adding to the uncertainty surrounding the Fed’s policy direction.

Recent comments from Fed officials highlight diverging views:

• Governor Waller and Vice Chair Bowman advocate rate cuts as early as July.
• Governor Kugler and President Daly signal caution, preferring a slower easing pace.
• Political tension escalated as Rep. Anna Paulina Luna accused Fed Chair Jerome Powell of perjury, further shaking market confidence.

The mixed messaging and ongoing leadership uncertainty have left the US Dollar vulnerable, amplifying demand for higher-yielding assets like the Australian Dollar.

Global Trade Optimism Lifts Risk Sentiment

A wave of trade optimism also supported risk assets:

• President Trump confirmed a 15% tariff deal with Japan, which includes a $550 billion investment pledge from Tokyo.
• Reports suggest the US and EU are nearing a similar deal, expected to be announced soon.
• High-level US-China trade talks are scheduled for next week in Stockholm.

These developments have helped improve market sentiment, supporting risk-on currencies such as the AUD and NZD.

AUD/USD Technical Outlook: Bulls Eye 0.6680

From a technical standpoint, the AUD/USD remains in a solid uptrend, trading near 0.6610 within an ascending channel pattern on the daily chart.

• The 14-day RSI is comfortably above 50, confirming bullish momentum.
• Price action has held above the 9-day EMA (0.6558), reinforcing near-term strength.
• A break above 0.6650 could see the pair test resistance at the channel top near 0.6680.

Key Support Levels:

• 0.6558 – 9-day EMA
• 0.6503 – 50-day EMA
• 0.6480 – Channel bottom
• 0.6454 – July 17 low

Outlook

With improving Australian data, stabilizing Chinese demand, and a weaker US Dollar, the AUD/USD pair remains poised for further gains. However, traders should stay cautious ahead of upcoming US PMI releases, Fed commentary, and trade deal confirmations that could trigger volatility.

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