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AUD/USD Advances Toward 0.6630 as Risk Appetite Improves; Focus Shifts to U.S. Inflation Data
Traders' Opinions
Summary:
The Australian dollar strengthened near 0.6630 against the U.S. dollar on Wednesday as investor risk sentiment improved ahead of key U.S. inflation data and growing expectations of Fed rate cuts.
Buy
CLOSEDAUDUSD
End Time
0.66280
Entry Price
0.67200
TP
0.65400
SL
0.66645 +0.00166 +0.25%
183
Points
Profit
0.65400
SL
0.66463
CLOSING
0.66280
Entry Price
0.67200
TP
The Australian dollar extended gains against its U.S. counterpart on Wednesday, climbing toward 0.6630 in European trading hours, as improving risk appetite across global markets lent support to risk-sensitive currencies. The move came against a backdrop of mounting expectations that the Federal Reserve could restart its monetary easing campaign as early as next week, a shift that has weighed on the U.S. dollar’s near-term trajectory.
Equity markets reflected the improved sentiment, with S&P 500 futures posting solid gains in early European hours, signaling that investors are once again leaning into risk assets. Market participants appear increasingly convinced that the Fed’s tightening cycle has reached its conclusion and that the central bank will move toward rate cuts after a year of restrictive policy.
The CME FedWatch tool showed that traders are currently pricing in an 8.4% probability of a 50-basis-point rate cut, which would lower the federal funds rate to the 3.75%–4.00% range. The larger probability, however, still lies with a standard quarter-point reduction, which would represent the Fed’s first rate cut since it paused earlier this year.
Despite the growing dovish tilt in expectations, the U.S. dollar remained relatively stable. The U.S. Dollar Index (DXY), which tracks the greenback against six major peers, traded near Tuesday’s high around 97.80 at the time of writing. The index has held firm even after the release of a benchmark revision to U.S. labor market data, which showed that the economy created 911,000 fewer jobs over the past 12 months than previously reported. While the revisions underscore a cooling jobs market, the dollar’s stability suggests that traders are waiting for more definitive signals before adjusting positions more aggressively.
The focus now turns to incoming U.S. inflation data, which could sharpen expectations ahead of the Fed’s September policy meeting. The Producer Price Index (PPI) for August, due at 12:30 GMT, is expected to show headline inflation holding steady at 3.3% on an annualized basis. Core PPI, which strips out volatile food and energy components, is projected to ease slightly to 3.5% from July’s 3.7%. A weaker-than-expected print could reinforce the case for rate cuts, providing further upward momentum for the AUD/USD pair.
The Australian dollar’s rally also reflects technical underpinnings. On the intraday chart, the pair continues to find support above the 50-day Exponential Moving Average (EMA50), a level that has acted as a dynamic floor in recent sessions. The short-term trend remains decisively bullish, supported by the price’s adherence to a rising bias line. Meanwhile, momentum signals are also flashing positive: the Relative Strength Index (RSI), having eased from overbought territory, has begun to turn upward again, suggesting that buyers remain firmly in control.
From a broader perspective, the Australian dollar has benefited from an improving global risk environment, particularly as investors bet that slowing U.S. economic momentum will force the Fed into a more accommodative stance. However, headwinds remain, with lingering concerns about China’s economic recovery and commodity demand likely to limit the Aussie’s upside over the medium term.
Technical Analaysis
For now, the path of least resistance appears tilted higher, with the 0.6650–0.6680 zone emerging as the next resistance band to watch. A break above this region could open the door toward 0.6720. On the downside, initial support lies near 0.6600, followed by the psychological 0.6570 level, where a breakdown could disrupt the current bullish narrative.
TRADE RECOMMENDATION
BUY AUDUSD
ENTRY PRICE: 0.6628
STOP LOSS: 0.6540
TAKE PROFIT: 0.6720
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