The Australian dollar extended gains against the US dollar, with AUD/USD climbing above 0.6350, as broad-based US dollar weakness and improving risk sentiment supported the pair. Investors reacted to softer US economic data, which reinforced speculation that the Federal Reserve may shift to a more accommodative stance in the coming months.
The US dollar struggled to maintain strength, weighed down by easing Treasury yields and growing expectations that the Fed’s rate-hiking cycle is nearing its end. While Fed officials have maintained a cautious tone, signs of slowing economic activity have led markets to reassess the likelihood of prolonged restrictive monetary policy.
Meanwhile, the Australian dollar found support from improving risk sentiment, as global equity markets stabilized and investors sought higher-yielding assets. Although concerns over China’s economic outlook continue to limit bullish momentum, any further signs of recovery in China’s demand for commodities could offer additional support to the Aussie.
From a technical perspective, AUD/USD has gained traction above key support at 0.6350, with near-term resistance seen around 0.6400. A clear break above this level could extend the rally, while failure to hold gains may lead to renewed selling pressure, bringing the pair back toward 0.6300.
Looking ahead, traders will focus on upcoming US inflation data and Federal Reserve commentary, which could determine the dollar’s next direction. If inflation readings come in softer than expected, the dollar could weaken further, providing room for AUD/USD to push higher. However, stronger-than-expected inflation could reignite rate hike fears, pressuring the Australian dollar.
For now, AUD/USD remains supported, but its ability to sustain gains depends on further dollar weakness and risk appetite trends. Unless the Fed signals a hawkish shift, the pair may continue to find upside momentum in the near term.
