The Australian Dollar barely reacted to the hawkish sets of RBA minutes. Instead, AUD/USD drifted lower in Asian trading, suggesting investors are no longer judging the Reserve Bank by what it says, but by what they believe it can realistically do.
As the chart shows, AUD/USD has entered a distinctly bearish phase in recent weeks, reflecting the broader consolidation — and in some cases outright weakness — that the US dollar has begun imposing across most major currency pairs.
The key macroeconomic factor for AUD/CAD remains the divergence in monetary policy between the two central banks. After three consecutive rate hikes since the beginning of the year, the Reserve Bank of Australia left its cash rate unchanged at 4.35%, citing persistent inflationary pressure and signs of slowing economic growth.
AUD/USD Price Forecast: Flattens near 0.6900, falling 20-day EMA warrants downside
AUD/USD has posted its longest weekly losing streak in 15 months, yet several indicators suggest bearish momentum may be fading. While the RBA retains a tightening bias and the US dollar remains well supported, futures positioning, options markets, yield spreads and key technical levels all point to growing risks of a corrective bounce in the Australian dollar.
The Australian dollar enters Q3 with the market's focus shifting away from geopolitics and back towards monetary policy and economic data. The Middle East conflict failed to become the sustained macro driver many feared, oil prices have retreated, and traders are once again weighing the relative outlook for the RBA and Fed.
Australia's latest economic data were supposed to answer one question: has April's oil shock weakened the economy enough to keep the Reserve Bank of Australia comfortably on hold?
Australia's Unemployment Rate falls in May: What 4.4% means for AUD/USD
Today is a huge day for the Australian economy with the release of May labour force and household spending data, carrying the potential to significantly shift RBA cash rate expectations, bond yields and Aussie dollar.
Steep bear-leg from 0.7000 zone extends into second consecutive day and hits the lowest levels since early April, as the Aussie dollar came under increased pressure from stronger dollar, driven by expectations that Fed may start tightening its monetary policy as early as September.
AUD/USD Price Forecast: More downside looks likely towards 0.6830
AUDUSD currency pair recently broke the support zone between the round support level 0.7000 (which stopped the previous impulse wave A at the start of June, as can be seen below) and the 61.8% Fibonacci correction of the upward impulse from March.