Ella 
AUD/USD is higher for a third day in a row – and the fifth day of positive moves in the previous six days – and climbed to more than two-week highs around 0.6775-0.6780 in early European trade on Wednesday. This momentum was fueled by a new round of dollar selling, with dovish expectations from the Federal Reserve (FED) continuing to weigh on the greenback.
In fact, the market is currently pricing in a higher likelihood of a 50 basis point rate cut by the Fed at the end of its two-day policy meeting later today. That dampened an overnight recovery in U.S. Treasury yields, driven by upbeat U.S. retail sales data. In addition to this, the generally positive tone in equity markets has also limited the US dollar’s recovery from its lowest levels since July 2023 and acted as a “tail” for AUD/USD.
On the other hand, the Australian dollar (AUD) continues to receive support from the Reserve Bank of Australia’s (RBA) hawkish stance. Reserve Bank of Australia Governor Michele Bullock reiterated on Thursday that reducing inflation to the target range of 2-3% remains the central bank’s top priority. It’s too early to cut interest rates. This further fueled the buying tone in AUD/USD.
Still, ongoing concerns about a slowdown in China, the world’s second-largest economy, could prevent traders from placing aggressive bullish bets around the Chinese proxy AUD. Investors may also be inclined to wait and see, awaiting the much-anticipated U.S. Federal Monetary Policy Committee (FOMC) monetary policy decision before taking stock of AUD/USD’s recent rebound from 200-day simple moving average (SMA) support.
