AUD/USD eases trims gains but remains near YTD highs above 0.6600

The Aussie is pulling back from the eight-month highs at 0.6625 hit earlier today, as the US Dollar pares some losses, but remains above 0.6600, consolidating gains after having rallied about 2% over the last five days.

AUD/USD Technical Overview

The AUD/USD pair is trading around 0.6610 on Thursday. The daily chart’s technical analysis suggested a persistent bullish bias as the pair moves upwards within the ascending channel pattern. The 14-day Relative Strength Index (RSI) is positioned above the 50 mark, suggesting a bullish bias is active. Additionally, the pair has also moved above the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is strengthening.

On the upside, the AUD/USD pair may target the psychological level of 0.6650, followed by the ascending channel’s upper boundary around 0.6680.

The AUD/USD pair could find its primary support at nine-day EMA at 0.6558. A break below this level could weaken the short-term price momentum and prompt the pair to test the 50-day EMA of 0.6503. Further declines would weaken the medium-term price momentum and drive the pair to approach the ascending channel’s lower boundary around 0.6480, followed by the three-week low at 0.6454, which was recorded on July 17.

Fundamental Overview

The trade deal between the US and Japan and hopes of an immediate agreement with the Eurozone have eased concerns about a global trade war and are boosting investors’ appetite for risk.Apart from that, US Treasury Secretary Scott Bessent affirmed earlier this week that US and Chinese officials will meet in Stockholm next week, aiming to extend the tariff deadline. This news adds support to the AUD, as China is Australia’s major trading partner.

Earlier today, RBA Governour, Michelle Bullock, reiterated the need for a cautious approach on interest rates as she assessed, inflationary risks have been brought under control without deteriorating the labour market. These comments cast doubt on the widely expected rate cut after the August 12 meeting and have provided additional support to the Aussie.The US Dollar, on the other hand, remains on the defensive amid the positive market sentiment, with investors awaiting US Preliminary PMI figures and weekly Jobless claims data for further insight into the economic activity and the momentum of the labor market.

Australian Dollar gains ground as US Dollar declines amid risk-on mood

The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is continuing to lose ground and trading around 97.10 at the time of writing. Investors will likely observe the S&P US Global Purchasing Managers Index (PMI) data for July later on Thursday.

US Treasury Secretary Scott Bessent said late Thursday that a nominee for the next Federal Reserve Chair is likely to be announced in December or January. Bessent emphasized that there is “no rush” to select a successor to current Fed Chair Jerome Powell, noting that the nominee could come from current board members or the heads of the district banks, according to Bloomberg.

President Trump announced a trade deal with Japan that includes a 15% tariff on Japanese exports to the US. As part of the agreement, Japan will invest $550 billion in the US and open its markets to key American products.

US Treasury Secretary Scott Bessent announced on Tuesday that American and Chinese officials will meet in Stockholm next week for a third round of high-level talks. The meeting follows his recent in-person discussions with Chinese Vice Premier He Lifeng in Geneva and London, as both sides work toward extending the current pause in trade tensions beyond mid-August.

President Trump said during a meeting with the Philippines President Bongbong Marcos on Tuesday that “I think we will get a trade deal; we're close to a trade deal.” I don't mind if the Philippines gets along with China, he added.

Republican Congresswoman Anna Paulina Luna has formally accused the Fed Chair Powell of committing perjury on two separate occasions, both stemming from discussions about the Fed's long-scheduled renovations to its head offices in Washington, DC.

Fed Governor Adriana Kugler said that the US central bank should not lower interest rates "for some time" since the effects of Trump administration tariffs are starting to show up in consumer prices. Kugler added that restrictive monetary policy is essential to keep inflationary psychology in line.

San Francisco Fed President Mary Daly said last week that expecting two rate cuts this year is a "reasonable" outlook, while warning against waiting too long. Daly added that rates would eventually settle at 3% or higher, exceeding the pre-pandemic neutral rate.

Fed Governor Christopher Waller believes that the US central bank should reduce its interest rate target at the July meeting, citing mounting economic risks. Waller added that delaying cuts runs the risk of needing more aggressive action later.

US Commerce Secretary Howard Lutnick stated unequivocally in a televised interview, “That’s a hard deadline, so on August 1, the new tariff rates will come in. Nothing stops countries from talking to us after August 1, but they’re going to start paying the tariffs on August 1.”

The latest Reserve Bank of Australia’s (RBA) Meeting Minutes indicated that the board agreed further rate cuts were warranted over time, with attention centered on timing and extent of easing. The majority believed it was best to await confirmation of an inflation slowdown before easing. Most members felt cutting rates three times in four meetings would not be "cautious and gradual.”