The Australian Dollar (AUD) has extended its winning streak for a third consecutive day against the US Dollar (USD) as of Monday. This upward momentum in the AUD/USD pair is driven by improved global risk sentiment and a hawkish stance from the Reserve Bank of Australia (RBA). Investors are keenly awaiting the RBA Meeting Minutes and the People’s Bank of China’s (PBoC) Interest Rate Decision, both scheduled for Tuesday, which could provide further market direction.

Hawkish RBA Holds Firm on Inflation Risks

RBA Governor Michele Bullock recently emphasized the central bank’s focus on potential upside risks to inflation, signaling that no rate cuts are anticipated in the near future. According to ABC News, Bullock noted that the RBA board believes it has achieved a balanced approach between curbing inflation and maintaining economic stability, reinforcing a hawkish outlook.

US Dollar Pressured by Dovish Fed Expectations

Conversely, the US Dollar has faced downward pressure as expectations grow for a potential interest rate cut by the Federal Reserve (Fed) in September. Recent US economic data, including stronger-than-expected Retail Sales and easing inflation indicators from both the Producer Price Index (PPI) and Consumer Price Index (CPI), have fueled speculation of a dovish shift in Fed policy. Additionally, a significant drop in July Housing Starts has further dampened the USD’s outlook. Market participants are now looking forward to Federal Reserve Chair Jerome Powell’s upcoming speech for more clues on the Fed’s policy direction.

Market Movers: Australian Dollar Gains on RBA’s Hawkish Tone

RBA Focus on Inflation Risks: The RBA’s commitment to tackling inflation without immediate rate cuts supports the AUD.

US Fed Dovish Signals: Fed officials, including San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee, have signaled a cautious approach to reducing interest rates, which has weighed on the USD.

Housing Data Weakness: US Housing Starts fell 6.8% in July, adding to concerns about economic momentum in the US.

China’s Economic Moves: The PBoC’s decision to maintain the current rate for its medium-term lending facility reflects cautious optimism, with potential implications for the Australian market due to close trade ties.

Technical Analysis: Australian Dollar/USD Targets 0.6700 Level

The Australian Dollar/USD pair is currently trading around 0.6680, showing bullish momentum within an ascending channel. The 14-day Relative Strength Index (RSI) is approaching the 70 level, indicating strong upward momentum.

Upside Potential: The pair could test the upper boundary of the ascending channel near 0.6740. A breakout above this level may drive the pair toward its seven-month high of 0.6798, last seen on July 11.

Support Levels: Immediate support is at the lower boundary of the ascending channel around 0.6630, followed by the nine-day Exponential Moving Average (EMA) at 0.6618. A break below these levels could shift the bias to bearish, with further downside potential toward the 0.6575 and 0.6470 levels.

As global economic developments unfold, the Australian Dollar’s performance will continue to be closely linked to the RBA’s policy actions and the broader risk sentiment in financial markets.