The Australian Dollar has shown signs of advancement in recent times, with the Reserve Bank of Australia (RBA) Minutes pointing towards a prolonged period of current cash rates. Despite the indication that a rate cut is unlikely in the near future, the Australian Dollar may still continue its upward trajectory. The currency is currently trading around 0.6750, with technical analysis suggesting a bullish bias. However, caution must be exercised as a further upward movement could lead to the currency pair being overbought, potentially resulting in a correction. The AUD/USD pair could test the upper boundaries of the ascending channel at the 0.6820 level, with support levels identified at 0.6670 and 0.6575, respectively.
On the other hand, the US Dollar may receive support from the Federal Open Market Committee (FOMC) Minutes release. The market is currently pricing in a nearly 67.5% chance of a 25 basis points Fed rate cut in its September meeting, down from previous expectations. Federal Reserve officials have expressed caution about making any policy changes, citing ongoing risks to inflation and the need for a gradual approach to reducing borrowing costs. This cautious stance could provide support for the US Dollar in the coming days.
China’s approach to bolstering its ailing real estate market could also have implications for Australian markets. The People’s Bank of China (PBoC) kept its Loan Prime Rates unchanged in August, but any changes in the Chinese economy could impact Australian markets, given their close trade relationship. China’s plan to allow local governments to use special bonds to purchase unsold properties could inject new life into the real estate market and potentially benefit Australia as well.
Despite the positive outlook for both the Australian Dollar and the US Dollar, there are several risk factors that could derail their current trajectories. Minneapolis Fed President Neel Kashkari’s concerns about a weakening labor market in the US could prompt discussions of further interest rate cuts in September. Additionally, RBA Governor Michele Bullock’s warning that the central bank will not hesitate to raise rates again to combat inflation could lead to increased volatility in the Australian Dollar. It is crucial for investors to monitor these risk factors closely to make informed decisions in the current economic landscape.
The current economic conditions present both opportunities and challenges for investors. While the Australian Dollar shows potential for growth and the US Dollar receives support from the FOMC, risk factors such as weakening labor markets and inflation concerns could impact currency movements. It is essential for investors to stay informed and exercise caution in navigating the ever-changing economic landscape.