AUD/USD Holds Firm as Markets Scale Back RBA Rate-Hike Expectations

Traders' Opinions

Summary:

AUD/USD remains stable near 0.7030 as persistent US Dollar weakness offsets disappointing Chinese PMI data. However, softer Australian inflation has significantly reduced expectations of another RBA rate hike, limiting further upside for the Aussie.

BUY AUDUSD

EXP

TRADING

0.70150

Entry Price

0.71050

0.69200

0.70181 -0.00103 -0.15%

0.0

Pips

Flat

0.69200

Exit Price

0.70150

Entry Price

0.71050

The Australian Dollar held steady near 0.7030 on Friday after Thursday's strong rally, supported by continued weakness in the US Dollar. However, gains remained capped after weaker-than-expected Chinese economic data highlighted slowing demand in Australia's largest trading partner.

China's NBS Manufacturing PMI unexpectedly slipped back into contraction territory at 49.2 in July from 50.3, while the Non-Manufacturing PMI also missed expectations, signaling broader weakness in the Chinese economy. The disappointing figures tempered optimism for the Aussie, given Australia's strong trade exposure to China.

The US Dollar, meanwhile, remained under pressure following softer US economic data. Second-quarter US GDP expanded by 1.5%, slowing from 2.1% in the previous quarter and falling short of market expectations, reinforcing concerns about slowing economic momentum and weighing on the Greenback.

Despite the weaker Dollar, expectations for further Reserve Bank of Australia tightening have eased significantly. Softer Australian inflation data has largely eliminated the likelihood of a rate hike at the August 11 policy meeting, limiting additional upside for the Australian currency.

According to Deutsche Bank, Australia's second-quarter CPI rose 0.6% quarter-on-quarter, below the 0.7% forecast, while annual inflation eased to 3.8% from 4.0%. Core inflation also came in below expectations, prompting markets to sharply reduce the probability of another RBA rate increase. Following the data, Australian two-year government bond yields fell, with traders now pricing only a minimal chance of a rate hike next month.

Technical Analysis

AUD/USD has staged an impressive recovery after bouncing strongly from the 0.6950 demand zone, with buyers driving price back to the 0.7015–0.7020 resistance area. This region previously acted as a ceiling, making the current retest a pivotal moment for the pair.

Price is now attempting to hold above the former resistance, which could turn into fresh support if buyers successfully defend it. A confirmed breakout and sustained close above 0.7020 would signal a continuation of the bullish recovery, opening the way toward the next resistance around 0.7100–0.7110.

The recent impulsive rally suggests bullish momentum is strengthening, while the sequence of higher lows from the July bottom indicates that demand is gradually returning to the market. As long as price remains above the breakout zone, the near-term bias continues to favor further gains.

However, if AUD/USD slips back below 0.7015 and fails to hold that level, the breakout would be invalidated. In that scenario, sellers could regain control and force a retracement toward the 0.6950 support area, where buyers are expected to step in once again.

TRADE RECOMMENDATION

BUY AUD/USD

ENTRY PRICE: 0.7015

STOP LOSS: 0.6920

TAKE PROFIT: 0.7105

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