The AUD/USD pair encountered formidable resistance near the 0.6750 level following a hesitant pullback during the late European session. Investors have turned cautious as they await the Federal Reserve’s (Fed) interest rate policy announcement scheduled for July 26.
In the London session, S&P500 futures registered substantial gains, signaling a more positive market sentiment. Investors are closely watching the US Dollar Index (DXY), which is gaining strength in preparation to recapture the intraday high of 101.41, as they anticipate a potential interest rate hike by the Fed after skipping it in June.
In the meantime, the Australian Dollar is expected to show significant movement ahead of the second-quarter inflation data. Analysts predict a quarterly inflation rate of 1.0%, down from the previous 1.4%, while the annual Consumer Price Index (CPI) is expected to contract to 6.2% from the previous 7.0%.
AUD/USD faces selling pressure as it attempts to breach the horizontal resistance established from the June 16 high around 0.6900. A Double Top chart pattern has formed, indicating a potential bearish reversal. The 20-period Exponential Moving Average (EMA) at 0.6758 is acting as a barrier for the Australian Dollar bulls.
The Relative Strength Index (RSI) (14) has dipped below 40.00, signaling the activation of downside momentum.
Looking ahead, if the AUD/USD moves below the immediate support at 0.6700, it may target the July 11 low at 0.6650, followed by the round-level support at 0.6600.
On the flip side, if there is a recovery above the July 20 high at 0.6847, the asset could climb towards the June 16 high of around 0.6900. Breaching the latter would propel the pair towards the February 16 high at 0.6936.
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