AUD/USD Holds Firm to Robust Intraday Advances, Nears Daily Peak at Approximately 0.6770-75 Range

The Australian Dollar (AUD) against the US Dollar (USD) pair, also known as AUD/USD, has been exhibiting strong intraday gains during the early European trading session on Tuesday. For the second consecutive day, it continues to experience fresh buying interest around the 200-day Simple Moving Average (SMA), a key technical indicator that traders use to analyze market trends. The spot prices have reached a new daily high in the 0.6770-75 range, buoyed by multiple supportive factors.

Investor sentiment is primarily being driven by China’s pledge to bolster its fragile economy. This commitment has infused a positive risk tone in the global equity markets, which is beneficial for the risk-sensitive Australian Dollar. This optimism stems from the recent announcements made by China’s Politburo, the ruling Communist Party’s top decision-making body. They have outlined plans to make strategic adjustments to their economic policies with a focus on increasing domestic demand, bolstering confidence, and mitigating risks.

Adding to this, the National Development and Reform Commission (NDRC) of China has introduced measures aimed at stimulating private investment in infrastructure projects. They also aim to strengthen financing mechanisms for private initiatives. These actions are seen as proactive steps towards stabilizing the Chinese economy and have contributed to the upbeat investor sentiment.

This prevailing positive sentiment has also created selling pressure on the safe-haven US Dollar. This downward pressure on the USD has further boosted the AUD/USD pair. The USD Index (DXY), which tracks the value of the Greenback against a basket of other major currencies, has pulled back from a two-week high. It appears to have halted its recovery trend that started a week ago from the lowest level since April 2022.

However, the continuation of the USD’s downward movement may be restricted as market participants are cautiously awaiting the Federal Reserve’s future monetary policy direction. With the Federal Open Market Committee (FOMC) two-day policy meeting scheduled to conclude on Wednesday, traders are on the lookout for any cues about the Fed’s future rate-hike trajectory.

The market is particularly keen to gauge any indications of a more dovish stance from the Fed. The outcome of this crucial meeting, along with Fed Chair Jerome Powell’s remarks during the post-meeting press conference, will significantly influence the near-term price dynamics of the USD. Consequently, the AUD/USD pair’s potential to bounce back from the 0.6900 mark would require additional buying to confirm.

In the meantime, market participants are shifting their attention towards the upcoming release of several important US macroeconomic data. This includes the Conference Board’s Consumer Confidence Index and the Richmond Fed Manufacturing Index, both due during the early North American session. These releases, along with the broader market sentiment, could provide short-term trading impetus around the AUD/USD pair.

Investors are also looking forward to the release of the Australian Consumer Inflation figures, scheduled for the Asian session on Wednesday. Moreover, the Advance US GDP print and the Core PCE Price Index, both due later this week, are expected to add to the market volatility and impact spot prices. These indicators will provide further insights into the health of the US economy and could potentially influence the Fed’s monetary policy decisions.