The Australian Dollar (AUD) is struggling to maintain upward momentum against the US Dollar (USD) as the pair trades just under 0.6550 during Friday’s European session. After three consecutive days of gains, investors are cautious ahead of the US Personal Consumption Expenditures (PCE) Price Index release, which will play a critical role in shaping the Federal Reserve’s next policy move.
AUD/USD Technical Outlook
At the time of writing, AUD/USD is hovering around 0.6544, slightly above its ascending trendline. The short-term bias remains positive, with the pair holding above the 9-day Exponential Moving Average (EMA).
- Upside Targets: A breakout above 0.6568 (August 14 high) could pave the way toward 0.6625 (July 24 high), followed by the psychological 0.6700 barrier.
- Support Levels: Initial support sits near 0.6500, backed by the 50-day EMA at 0.6498. A clear break below 0.6490 could expose 0.6414 (August 21 low).
Momentum indicators show a cautious tone — the RSI is moderately bullish, while the ADX highlights a weak trend, signaling that a fresh catalyst will be needed for a breakout.
Fundamental Drivers
US Dollar Awaits Inflation Data
Markets are focused on the July PCE Price Index, the Fed’s preferred inflation gauge. Core PCE is expected to climb 2.9% YoY, while headline PCE is forecast at 2.6%. The outcome will determine whether the Fed cuts rates in September.
According to the CME FedWatch tool, traders are pricing in an 85% chance of a 25-basis-point cut. Fed Governor Christopher Waller has already voiced support for a September rate reduction, citing growing labor market risks.
Meanwhile, US GDP growth surprised to the upside, expanding 3.3% annualized in Q2, which continues to lend background support to the Greenback.
Australian Economic Updates
- Private Sector Credit: July’s credit data beat forecasts, rising 0.7% MoM, a sign of improving business sentiment.
- RBA Outlook: Minutes from the Reserve Bank of Australia’s August meeting suggest more rate cuts are likely over the next year, but the timing remains data-dependent.
- China Factor: With Australia’s economy heavily tied to China, traders are also watching Beijing closely. Rising trade tensions — including Trump’s threats of a 200% tariff on Chinese goods — could weigh heavily on the Aussie.
Outlook
The short-term trajectory for AUD/USD will hinge on Friday’s US PCE inflation data. A softer-than-expected print could push the pair above 0.6550 toward the monthly highs, while a stronger inflation surprise may reinforce USD demand, dragging AUD/USD back toward 0.6500 and below.
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