The Australian dollar (AUD) has reached a two-week high against the US dollar (USD), benefiting from the US dollar’s recent loss of momentum. The greenback weakened last week after the US Federal Reserve’s rate hike expectations eased, especially following a disappointing June jobs report. The US Independence Day holiday further subdued market activity, allowing the AUD and other currencies to gain ground.
Year to date, AUD/USD has risen approximately 4%, positioning the Australian dollar as the best-performing currency among the Group of Ten (G10). On Friday alone, the pair gained 0.3%, continuing its upward trend. Similarly, the New Zealand dollar (NZD) also strengthened, with NZD/USD increasing by 0.3% and bouncing back from a critical support level at 0.5600.
In Asia, other regional currencies showed mixed movements. USD/JPY retreated from its 40-year highs following a sharp reversal linked to weak US jobs data. Meanwhile, USD/CNH and USD/SGD both declined modestly by 0.1%. These shifts reflect differing regional responses to the recent US economic signals and geopolitical uncertainties.
Australia’s improving domestic economic indicators have also supported the AUD’s rise. The country’s services sector returned to growth in June, with the S&P Global Services Purchasing Managers’ Index (PMI) climbing to 50.5 from 48.7 in May. This improvement was driven by stronger consumer-related activity and increased hiring, although demand remained soft overall. New orders fell for the fourth consecutive month, and export orders declined amid ongoing disruptions linked to conflicts in the Middle East.
Despite easing input cost pressures, businesses slowed price increases to their weakest pace since January, reflecting cautious optimism amid subdued demand. For AUD/USD to sustain its upward momentum, it needs to break through key resistance levels, including its 21-day exponential moving average (EMA) at 0.6979 and then its 100-day EMA at 0.7016. Support lies near the 0.6900 level.
Looking ahead, market participants are closely watching upcoming events that could influence currency movements. The Reserve Bank of New Zealand (RBNZ) is set to announce its rate decision on Wednesday, with expectations of a rise in the official cash rate from 2.25% to 2.50%. This decision could trigger significant volatility in NZD/USD.
Additional key data releases include the Federal Open Market Committee (FOMC) minutes from June’s meeting on Thursday, which may provide further insight into US monetary policy direction. China will release its June Consumer Price Index (CPI) and Producer Price Index (PPI), while Japan and Germany will publish inflation data later in the week.
Overall, the AUD/USD exchange rate is testing important technical boundaries amid a backdrop of global economic uncertainties and evolving central bank policies. The weakening US dollar combined with Australia’s gradual economic recovery has helped push the pair higher, but sustained gains will depend on upcoming data and geopolitical developments.
