FX.co ★ AUD/USD

On Monday, AUD/USD is under downward pressure. The price reached 0.7160 during the Asian session. The US Dollar (USD) gained strength following comments by Fed Chairman Kevin Warsh, who noted that rate increases might be needed if policymakers lack confidence that inflation is on track to return to the central bank's 2% target. In his first speech at the Jackson Hole symposium on Friday, Warsh said that "we will have work to do" if there is no sign of inflationary pressures easing, adding that financial conditions are not tight and signaling that rate hikes may be required. We need to feel comfortable with the fact that underlying inflation is working towards our goal, both clearly and at an adequate pace," said Warsh. "Anything less will mean that we have more work to do," he added. According to the CME FedWatch tool, the market is pricing in a probability of 57.5%, as compared to 35% before the speech, of 25 basis points (bps) in hikes at the next FOMC meeting of the Fed in September. Traders await the publication of China's NBS PMI index. Should the figures indicate an improvement, this may help reduce the Aussie’s decline, given that China is Australia’s key trading partner.

On the daily chart, the pair AUD/USD shows a constructive bullish outlook, with price trading above the 100-day simple moving average and the Bollinger middle band, indicating underlying demand for the currency pair even during small pullbacks. The price is moving towards the upper Bollinger band level, while the 14-period RSI, at 62.7, is in positive territory. On the upside, the nearest resistance area lies at the upper Bollinger band level of 0.7205, with a successful breakout setting the stage for further extension of the ongoing rally. On the downside, the initial level of support lies at the Bollinger middle band of 0.7105, followed by the 100-day SMA of 0.7078 and the lower Bollinger band of 0.7005, collectively forming the range that supports the bulls on the chart.