The Australian Dollar (AUD) strengthened by 0.12% to trade near 0.6995 against the US Dollar (USD) during the Asian session on Monday, recovering from a weak opening as the US Dollar faced selling pressure. This move was attributed to increased market expectations that the Federal Reserve will keep interest rates unchanged at its upcoming July policy meeting, following the release of June's US Consumer Price Index (CPI) data indicating cooling inflationary pressures [1].
At the time of reporting, the US Dollar Index (DXY), which measures the Greenback against six major currencies, traded marginally lower around 100.70 after an initial strong opening. According to the CME FedWatch tool, the probability of the Fed maintaining current rates in July rose to 85.6%, up from 65.8% the previous week, reflecting a significant shift in market sentiment after the latest inflation data [1].
On the Australian side, the AUD outperformed its major peers following the People's Bank of China's (PBOC) decision to leave Prime Lending Rates (PLRs) unchanged, which supported the currency. Technically, AUD/USD traded around 0.6990, holding a modestly bullish near-term bias as it remained above the 20-day exponential moving average (EMA) at 0.6970. The Relative Strength Index (RSI) at 51.8 indicated stabilizing upside momentum. Immediate support is seen at the 20-day EMA near 0.6970, with further support below 0.6950 and at the March 30 low of 0.6874. On the upside, a break above the July 15 high at 0.7021 could open the path toward 0.7100 [1].
CONCLUSION
The AUD/USD pair's recovery is driven by expectations of a Fed rate pause and supportive policy signals from China. Technical indicators suggest a mildly constructive outlook for the pair as long as it holds above key support levels. Market sentiment remains cautiously optimistic, with further gains possible if resistance levels are breached.