The AUD/USD currency pair has seen a significant surge, hitting its highest point since June 3rd, reaching 0.7170 after starting from a low of 0.6870 during June. This increase occurred alongside a decline in the US dollar, which has been affected by the national debt reaching an unprecedented $40 trillion.
US Dollar Decline Grows
The rise in the AUD/USD pair coincided with the US dollar plummeting to its lowest levels in several months. The DXY Index fell to 98.56, a drop not seen since May 11, and it rests about 3.18% lower than its high of 101.80 recorded this year.
This downturn reflects growing worries about the US economic climate, especially with the national debt escalating beyond $40 trillion, which has driven bond yields to their highest levels in almost two decades. Efforts by the Federal Reserve to address the situation and lower these yields seem to have largely backfired.
Bond yields have risen due to ongoing anxieties regarding economic stability. Inflation is still quite high, and consumer confidence appears to be dipping significantly. A report from the Conference Board set to be released on Tuesday is anticipated to show a notable decrease in confidence this month.
Meanwhile, Australian bond yields have also increased, with the 30-year yield reaching 5.60%, the highest it has been in over ten years, following a period of decline during the pandemic.
Surprisingly, the AUD/USD pair has continued to climb despite new data showing some weakness in the Australian economy. A recent report indicated that more than 15,000 jobs were lost last month, along with a slight decline in the participation rate. This suggests that the Reserve Bank of Australia may choose to keep interest rates steady for the time being due to the easing of inflation pressures.
This week, the focus will be on the upcoming US Personal Consumption Expenditures (PCE) report releasing on Thursday. Additionally, all eyes will be on Fed Chair Kevin Warsh as he addresses the Jackson Hole Symposium.
AUD/USD Technical Analysis
Looking at the daily chart, it’s evident that the AUD/USD has been on a notable uptrend after bottoming at 0.6865 on June 30th, and it has now climbed to 0.7170, marking its peak since early June.
The pair continues to build momentum, with the Relative Strength Index (RSI) reaching 69. Furthermore, the Average Directional Index (ADX) has also been trending upward this month.
Given these trends, it’s likely the pair will keep rising in the near future, with the next significant target set at 0.7266, the highest level observed on May 13.
