The Australian Dollar (AUD) continued its upward momentum for a third consecutive trading session, rising 0.25% on Monday as investors recalibrated their expectations for Federal Reserve (Fed) interest rate hikes following a softer US jobs report last week [1]. This shift in sentiment led to a weaker US Dollar (USD), pushing the AUD/USD pair higher to 0.6950 after rebounding from daily lows of 0.6921 [1].
US economic data showed that business activity in the services sector remained in expansion, with the ISM Services PMI for June at 54, slightly down from 54.5 but matching estimates [1]. The survey's Prices Index fell from 71.3 to 67.7, while the Employment Index improved from 47.9 to 51.2 [1]. Despite the resilient data, the softer-than-expected June Non-Farm Payrolls (NFP) print last week prompted investors to reduce hawkish Fed bets. However, Fed Governor Christopher Waller maintained a hawkish stance, emphasizing the Fed's commitment to 2% inflation and noting that risks have shifted as the labor market stabilizes while inflation rises [1].
Looking ahead, traders are awaiting the release of the Fed’s latest meeting minutes, the first under new Fed Chair Kevin Warsh, for further clues on the interest rate outlook. Additionally, Initial Jobless Claims for the week ending July 4 are anticipated [1].
In Australia, the Reserve Bank of Australia (RBA) minutes indicated a pause to assess the impact of previous rate hikes, but the board remains committed to achieving price stability and signaled willingness to increase rates if necessary [1]. This hawkish tilt from the RBA helped limit some of the AUD/USD's initial losses. The upcoming economic calendar is light, with traders focusing on the release of Westpac Consumer Confidence for July on July 13 and an update on Consumer Inflation Expectations [1].
Technically, AUD/USD trades at 0.6955 with a bearish near-term bias, as the pair remains below key simple moving averages clustered around 0.7091. The Relative Strength Index (14) at approximately 43 suggests ongoing downside pressure, though the recent decline has shown only a modest loss of momentum [1].
CONCLUSION
The Australian Dollar's rally reflects shifting Fed rate expectations following softer US jobs data, while the RBA's hawkish stance provides additional support. Despite technical indicators pointing to a bearish bias, market participants are closely watching upcoming US and Australian economic releases for further direction.