AUD/USD Regains Ground Near 0.6500 as Dovish Powell Weakens US Dollar

The Australian Dollar (AUD) made a strong comeback against the US Dollar (USD) on Friday, climbing back toward the 0.6500 mark after a sharp selloff earlier in the week. The rebound came as Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole Symposium triggered broad USD weakness, boosting risk-sensitive currencies like the Aussie.

Powell’s Speech Sparks USD Selloff

Speaking at Jackson Hole, Powell confirmed the Fed’s shift toward a flexible inflation-targeting framework, signaling patience in policy adjustments. He acknowledged rising downside risks to the US labor market while suggesting that the inflationary effects of tariffs may prove short-lived.

These comments immediately pressured the US Dollar, with the US Dollar Index (DXY) falling 0.7% to trade around 97.90. Global equities rallied as Powell’s dovish stance fueled risk appetite, helping AUD/USD erase part of its weekly losses.

Market Sentiment Turns Risk-On

Powell’s softer tone lifted Wall Street, with the Dow Jones, Nasdaq, and S&P 500 indices advancing between 1.5% and 1.8%. Risk-on sentiment spilled over into currency markets, helping the Australian Dollar rebound strongly after four days of consecutive declines.

Technical Outlook: AUD/USD Levels to Watch

• Immediate resistance: 0.6500 psychological level
• Next hurdle: 0.6625 (July 24 high), followed by 0.6687 (November 2024 peak)
• Key support: 0.6415 (August low), 0.6384 (200-day SMA), and 0.6372 (June floor)

Momentum indicators show early signs of stabilization, with the RSI recovering from oversold territory. A sustained move above 0.6500 could confirm a short-term bullish reversal, while a failure to hold the level risks another slide toward 0.6400.

Outlook: Powell the Deciding Factor

For now, AUD/USD remains range-bound between 0.6400 and 0.6600, with Powell’s dovish remarks offering the Aussie some breathing room. Traders will look to upcoming US data releases and China’s economic performance for further direction, as both remain key drivers for the pair.

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