Ella 
On Tuesday, AUD/USD attracted fresh buyers around the 0.6400 round-figure mark and continued its steady intraday gains early in the European session. Spot prices recovered further from the lowest level since November 2022 touched on Friday and climbed to a multi-session high in the last hour, near the 0.6450 level.
Global risk sentiment picked up slightly on hopes of more stimulus from China, prompting a sell-off in some safe-haven U.S. dollars (USD), while the risk-sensitive Australian dollar (AUD) benefited. Moderate weakness in U.S. Treasury yields further weighed on the greenback. Still, the prospect of further policy tightening by the Federal Reserve should act as a “tailwind” for U.S. bond yields and the dollar.
It is worth recalling that the market has been pricing in a 25 basis point rate hike by the Fed before the end of the year. Newly released US macro data continues to show a remarkably resilient economy, which should allow the Fed to keep interest rates higher for longer. The hawkish outlook, in turn, pushed the yield on the benchmark 10-year U.S. government bond to its highest level since 2007 on Monday, favoring dollar bulls.
In addition to this, concerns over the deteriorating economic situation in China also dampened the optimism of the market and the exchange rate of the Australian dollar represented by China. This, combined with bets that the Reserve Bank of Australia (RBA) will make another shelve decision in September, could deter traders from placing aggressive bullish bets around the AUD/USD pair. Therefore, it would be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out.
Investors may also opt to wait and see ahead of the crucial Jackson Hole symposium, as comments from Federal Reserve Chairman Jerome Powell will be closely watched for comments on the path of future rate hikes clues. This in turn will affect USD price dynamics and help determine the next directional move for the AUD/USD pair. This week, traders will also focus on Wednesday’s flash manufacturing purchasing managers’ indices (PMI) from Australia and the US.
Meanwhile, Tuesday’s U.S. economic calendar, which includes existing home sales and the Richmond manufacturing index, as well as speeches from influential FOMC members and U.S. bond yields, will drive dollar demand. Additionally, broader market risk sentiment should help generate short-term trading opportunities around the AUD/USD pair.
