AUD/USD technical analysis: Buyer support emerges at $0.7122

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Australian dollar drops 0.52% to $0.7158

Highlights

Markets increased the probability of a Reserve Bank of Australia interest rate hike after July inflation exceeded expectations.
Stronger-than-expected inflation data produced a hawkish monetary policy outlook for the near term.
AUD/USD trades below key moving averages on short- and medium-term horizons, with bearish momentum dominant and a 74% likelihood of a move to the $0.7122 to $0.7194 range.

Hawkish RBA bets rise after inflation surprise boosts rate expectations

Markets increased bets on a Reserve Bank of Australia rate hike after the release of a higher-than-expected July inflation report, as reported by Fxstreet. This confirmation of stronger inflation data has shifted expectations around monetary policy, increasing the likelihood of an interest rate move in the near term. Hawkish sentiment around the RBA follows these developments, though price action has remained under broader selling pressure.

Weak momentum signals persist as AUD/USD tests major supports

On the H1 chart, AUD/USD trades below the MA-20 at $0.7194 and MA-50 at $0.7188, while holding above the MA-200 at $0.7049. The Ichimoku Kijun serves as immediate resistance at $0.7184. Momentum indicators are weak: RSI stands at 29.03 (oversold), CCI and Stochastic RSI both flag oversold conditions, and Bull/Bear Power points to continued selling. MACD, ADX, and the Awesome Oscillator all register neutral readings, signaling a pause in momentum and little indication of a rebound.

Downside bias intensifies as volatility band contains price action

Over the next two to three trading days, AUD/USD is expected to remain within a volatility band bounded by $0.7122 and $0.7194. The probability skews to the downside, with a 74% chance of a further decline and only a 26% likelihood of a near-term upward move. A break above the $0.7184 resistance would be needed to trigger a bullish scenario, while a sustained move below $0.7122 may accelerate further weakness.

Viktoras Karapetjanc, expert at Traders Union, sees the AUD/USD holding above major support despite recent selling pressure. He notes that rising inflation in Australia has strengthened expectations for a rate hike, which could eventually boost sentiment for the Aussie dollar. However, technical momentum remains weak in the short term. Karapetjanc remains optimistic about the longer-term potential. "If the AUD/USD manages to stay above key support and sentiment around rate hikes persists, I expect bullish opportunities to emerge soon."

Earlier, analysts noted that ongoing policy divergence and shifting bond market dynamics underpinned the recent trends in AUD/USD. The current analysis adds a new dimension as renewed hawkish expectations for the Reserve Bank of Australia are dampened by persistent downside momentum, with traders advised to watch for a decisive break of the $0.7122 support as a signal for further weakness.

Source of Data: AUD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.