The Australian Dollar extended its gains against the U.S. Dollar on Thursday, with the AUD/USD pair climbing 0.44% to trade around 0.6529. The upward move comes as contrasting inflation trends between Australia and the United States revive bullish momentum, pushing the pair closer to key technical resistance.
Investors are closely watching Friday’s release of the University of Michigan’s preliminary June Consumer Sentiment report, which may influence U.S. Dollar direction in the near term. The sentiment index is expected to tick up to 53.5 from May’s 52.2 reading. Markets are also focused on accompanying inflation expectations data, with the prior 1-year and 5-year figures reported at 6.6% and 4.2%, respectively. Any downside surprise in sentiment or persistent inflation concerns could drive USD volatility and shape the path for AUD/USD.
Inflation Data Fuels Policy Divergence Speculation
The latest inflation figures from Australia have reignited hawkish expectations for the Reserve Bank of Australia (RBA). Consumer Inflation Expectations rose sharply to 5% in June from 4.1% in May, suggesting ongoing price pressures that may prompt the RBA to hold off on any dovish shift.
In contrast, recent U.S. data has pointed to cooling inflation and a resilient labor market, reinforcing speculation that the Federal Reserve may begin cutting interest rates as early as September. This divergence in monetary policy outlook has supported the Aussie dollar and pressured the greenback.
Technical Outlook: Key Resistance Levels in Focus
AUD/USD is now testing critical resistance at 0.6537, marking the upper boundary of a rising wedge pattern established on May 26. Just above lies the year-to-date high of 0.6545, reached on Wednesday. A sustained breakout above this level could pave the way for further gains toward the 0.6600 psychological barrier, with a more extended bullish target near the 78.6% Fibonacci retracement level at 0.6722.
On the downside, immediate support is seen at the 20-day Simple Moving Average (SMA) near 0.6468, followed by the 200-day SMA at 0.6428, which also aligns with the 50% Fibonacci retracement of the October-April decline—a critical level for determining broader trend momentum.
The Relative Strength Index (RSI) stands at 59, indicating that bullish momentum remains intact without yet entering overbought territory.
With macroeconomic divergence and technical signals aligning, traders are preparing for potential breakout scenarios, with near-term direction likely hinging on U.S. consumer sentiment and inflation expectation data due Friday.
