Australian Dollar Forecast: AUD/USD Breaks Out, Tests 2024 High

AUD/USD Key Points

• AUD/USD is benefitting from speculation about another interest rate hike from the RBA after a higher-than-expected CPI report and strong retail sales figure.
• With little on the Australian economic calendar this week, AUD/USD traders’ focus will be on US developments.
• For AUD/USD bulls, the ideal setup would be a controlled dip back to previous-resistance-turned-support near 0.6700 to allow a secondary entry on a retest of the breakout level.

European currencies have garnered most of the headlines over the last couple of weeks given the key elections in the UK (comfortable Labour victory) and France (Hung Parliament after voters rejected the far-right RN party last weekend), but the Australian dollar has quietly cobbled together a strong rally off its early June low.

The Aussie is benefitting from speculation about another interest rate hike from the Reserve Bank of Australia (RBA) after a higher-than-expected CPI report (4.0% y/y) and strong retail sales figure (+0.6% m/m vs. just 0.3% eyed) in recent weeks. Accordingly, the market is pricing in about a 20% chance of an interest rate increase next month and a roughly 50/50 shot of a move by September.

With little on the Australian economic calendar this week, AUD/USD traders’ focus will be on US developments, including Fed Chairman Jerome Powell’s testimony to Congress tomorrow and on Wednesday, as well as the release of consumer (Thursday) and producer (Friday) price indices.

Australian Dollar Technical Analysis – AUD/USD Daily Chart

Source: TradingView, StoneX

Looking at the daily chart, AUD/USD has finally broken definitively out of 2-month consolidation range between 0.6575 and 0.6700, shifting the medium-term bias back in favor of the bulls. The pair has rallied up to resistance at the 78.6% Fibonacci retracement of the December-April drop near 0.6760, and prices are accordingly pausing at that level so far today.

For bulls, the ideal setup would be a controlled dip back to previous-resistance-turned-support near 0.6700 to allow a secondary entry on a retest of the breakout level, but with the RSI still not in overbought territory, the risk is that a brief pause is all we see before AUD/USD breaks above 0.6760 resistance and makes a run at the December highs in the upper-0.6800s. Only a confirmed break back below 0.6700 would erase the current bullish bias in the pair.

-- Written by Matt Weller, Global Head of Research

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