AUD/USD Forex Technical Analysis – Aussie Strengthens as Investors Raise Doubts Over Future Fed Rate Hikes

The AUD/USD rallied on Friday as the U.S. Dollar retreated on growing concerns over the Federal Reserve’s ability to raise interest rates later this year due to softening inflation data.  The rebound in crude oil from a seven-month low also supported the commodity-linked Australian Dollar.

The U.S. Dollar was pressured by weak U.S. Flash Manufacturing PMI data for June. It came in at 52.1, down from the final May reading of 52.7. Traders were looking for a reading of 53.0. The index also hit its lowest level in 9 months.

The U.S. Flash Services PMI also missed the mark, coming in at 53.0, down from 53.6 in May and below the 53.9 estimate.

On the positive side, U.S. New Home Sales came in at 610K, beating the 599K estimate and coming in above May’s final reading of 593K.

U.S. Treasury yields were mixed, making the U.S. Dollar a less-attractive investment. The yield on the benchmark 10-year Treasury Note finished flat at 2.15 percent, while the yield on the 30-year Bond was down slightly at 2.712 percent.

In other news, St. Louis Fed chief President James Bullard said the central bank should wait on further rate hikes, while Cleveland Fed chief Loretta Mester said recent inflation weakness should not defer another rate rise this year.

Technically, the trend is still up despite the loss of upside momentum most of the week. I was expecting a full correction into the retracement zone at .7503 to .7472, but it looks like the move to .7535 was sufficient to draw the attention of buyers. Friday’s price action made this price a new minor bottom.

If the upside momentum continues then we should see a test of .7585 to .7597 early next week. This will be a major decision area because bearish traders are going to try to form a potentially bearish secondary lower top, while bullish traders are going to try to drive the market through this zone in an effort to make .7535 a new main bottom.