Australian Dollar rises as US Dollar loses ground due to the downbeat US bond yields.

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• Australian Dollar rises as US Dollar loses ground due to the downbeat US bond yields.
• Australia’s currency strengthens on hawkish remarks from RBA’s Bullock.
• Fed’s Powell emphasized on closely monitoring inflation’s movement toward the 2% target.

The Australian Dollar (AUD) extends its gains for the second consecutive day on a subdued US Dollar (USD), which could be attributed to the decline in the US bond yields. Moreover, the hawkish comments from the Reserve Bank of Australia (RBA) Governor Michele Bullock provided support to strengthening the Aussie Dollar, which in turn, underpinned the AUD/USD pair.

Australian central bank kept its Official Cash Rate (OCR) unchanged at 4.35% on Tuesday, a decision that was widely anticipated. Governor Bullock, in the press conference following the interest rate decision, refrained from making definitive statements about future policy actions, neither ruling anything in nor out. However, there is limited room for RBA policymakers to raise interest rates further as the Australian economy is going through a cost-of-living crisis.

The US Dollar Index (DXY) continues to lose ground despite the hawkish comments from Federal Reserve (Fed) Chair Jerome Powell. Powell dampened expectations of a rate cut and emphasized the importance of closely monitoring inflation’s movement toward the 2% core target.

Fed Bank of Cleveland President Loretta Mester remarked on Tuesday that the US central bank might consider lowering interest rates later in the year. However, she cautioned against acting too hastily. Additionally, Fed Bank of Philadelphia President Patrick Harker expressed support for the Fed’s decision to keep interest rates steady last week, citing an outlook that suggests further declines in inflation.

The Australian Dollar trades around 0.6540 on Wednesday, slightly below the immediate resistance at the 0.6550 level. A breakout above this level could potentially trigger further upward movement for the AUD/USD pair, testing the 23.6% Fibonacci retracement level at 0.6563 and possibly reaching the 21-day Exponential Moving Average (EMA) at 0.6585. Conversely, if the pair faces downward pressure, key support is expected at the psychological level of 0.6500. Further support levels include the weekly low at 0.6468, followed by a major support level at 0.6450.

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