Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

AUD/USD hits six-month high amid strong Australian economic data

The AUD/USD soared to a six-month high last week, closing at .6748 (+1.21%), driven by robust Australian economic data, rising commodity prices, and contrasting expectations for US and Australian interest rates.

Source: AdobeImages

Last week, the AUD/USD closed at .6748 (+1.21%), its highest weekly close this year. The rally was supported by soft US economic data, in contrast to firm Australian economic data and higher commodity prices.

Strong Australian economic data

Australia's run of stronger-than-expected economic data has continued after the upside surprise in the monthly consumer price index (CPI) indicator for May. The hotter inflation numbers were followed by stronger-than-expected retail sales and building approvals data. This combination has the Australian interest rates market pricing in a 33% chance of another Reserve Bank of Australia (RBA) rate hike before year-end.

Support from commodities and risk sentiment

Finally, the AUD/USD has received support from risk-seeking flows and higher commodity prices, best illustrated by the iron ore price hitting a one-month high last week. While we would love to give the AUD/USD’s report card straight 'A’s,” it would be remiss of us not to hand out a 'C' for its exposure to the Chinese economy, which is a known drag.

Divergence in US economic trends

At the other end of the spectrum, labour market, inflation, and activity data in the US have mostly been cooler than expected of late. This has heightened expectations that the Fed will deliver its first rate cut in September before a second rate cut in December, weighing on the greenback. This also provides a stark illustration of the divergence between the monetary policy outlook of the Fed and the RBA.

Local economic calendar

This week's local economic calendar is relatively quiet, with the main highlights being housing finance, business and consumer confidence surveys, the latter of which is previewed below.

Westpac consumer confidence

Date: Tuesday, 9 July at 10.30am AEST

In June, the Westpac consumer sentiment index increased by 1.7% to 83.6 points, marking the first rise in four months and the highest reading since February. Nonetheless, the index remains in “deeply pessimistic” territory as persistent inflation and high interest rates continue to weigh on Australian households.

Higher-than-expected inflation and the threat of an additional RBA rate hike before year-end are expected to weigh on consumer sentiment and offset the positive impact of the stage 3 tax cuts. Preliminary expectations are for the consumer sentiment index to fall -0.3% in July to 83.4.

Aus consumer confidence index chart

Source: TradingView

AUD/USD technical analysis

After many weeks of choppy sideways price action, the AUD/USD finally got its act together last week, breaking and closing above the mid-May .6714 high and multi-week trendline resistance at around .6710/20.

The close above .6710/20 significantly increases the chances that the AUD/USD based at the 19 April .6362 low. It also opens the way for the AUD/USD to extend its rally towards a cluster of horizontal resistance at .6870/00 before weekly downtrend resistance at .6980/.7000c, coming from the 2021 .8007 high.

On the downside, if the AUD/USD were to sustain a break below horizontal support at .6700/.6680, it would temper the upside enthusiasm and warn of a retest of the 200-day moving average at .6560.

AUD/USD weekly chart

Source: TradingView

AUD/USD daily chart

Source: TradingView
  • Source: TradingView. The figures stated are as of 8 July 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Explore the markets with our free course

Discover the range of markets you can trade CFDs on - and learn how they work - with IG Academy's online course.

Turn knowledge into success

Practice makes perfect. Take what you’ve learned in this shares strategy article, and try it out in your demo account.

Ready to trade shares?

Put the lessons in this article to use in a live account. Upgrading is quick and simple.

  • Trade over 13,000 popular global stocks
  • Protect your capital with risk management tools
  • Deal on 70 key US stocks out-of-hours, so you can react to news

Inspired to trade?

Put the knowledge you’ve gained from this article into practice. Log in to your account now.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.