The Australian Dollar (AUD) had been on a remarkable upward trajectory in recent weeks, but its bullish momentum seems to be slowing down. After reaching a 4-month peak last week, the AUD has softened to start the new week, prompting questions about whether it will test support levels against the US Dollar (USD).

One of the catalysts behind the AUD’s surge was solid jobs data, which revealed an unemployment rate of 3.6%. This impressive figure has reignited speculation of a potential interest rate hike by the Reserve Bank of Australia (RBA) in the near future. In fact, the interest rate market is currently pricing in a 50-50 chance of a 25 basis point lift at the RBA’s monetary policy meeting on July 4th.

Australian Dollar softens as solid jobs data revives RBA prospects while AUD/USD tests support levels

However, despite the positive economic indicators, the Australian Dollar is experiencing a pullback. Some analysts believe that this correction could provide an opportunity to test support levels and assess whether the bullishness will resume for the AUD/USD pair.

In terms of technical analysis, the AUD/USD pair surged to just shy of 69 cents last week, coming close to a prior peak of 0.6920. These levels could potentially offer resistance if the rally continues. Additionally, resistance may be encountered at the previous peaks of 0.7011 and 0.7030, followed by a cluster zone in the 0.7137 – 0.7157 area.

One noteworthy technical indicator that emerged during the AUD’s rally was a Bullish Engulfing Candlestick formation. This pattern has proven to be a reliable signal in the past, suggesting that it may be worth monitoring going forward. However, it is important to remember that past performance is not indicative of future results.

On the downside, the levels that previously served as resistance between 0.6780 and 0.6820 could now become crucial support areas. If the AUD/USD pair remains above these levels, it could indicate the continuation of bullish momentum. Conversely, a break below these levels may signal a shift in sentiment, with bearish momentum potentially taking hold.

A closer look at the moving averages reveals an interesting observation. The 10-, 14-, 21-, 34-, 55-, 100-, 200-, and 260-day Simple Moving Averages (SMA) all lie between 0.6660 and 0.6769. This concentration of SMAs in close proximity is unusual given the significant movement in the AUD/USD pair. Traders and investors will closely monitor whether the price remains above or falls below these SMAs, as it could provide further insight into the future direction of the currency pair.

The current softening of the Australian Dollar after its impressive bull run raises questions about the sustainability of its upward trend. The upcoming RBA meeting and the decision regarding interest rates will likely play a crucial role in determining the future direction of the AUD/USD pair.

The current softening of the Australian Dollar after its impressive bull run raises questions about the sustainability of its upward trend. Traders and investors are closely observing the market to gauge whether this pullback is a temporary correction or a potential shift in sentiment. The upcoming Reserve Bank of Australia (RBA) meeting will be a critical event that could provide further insight into the future direction of the AUD/USD pair. The decision on interest rates and any accompanying statements from the RBA will be closely scrutinized for clues about the central bank’s monetary policy stance.

Furthermore, global factors can also influence the performance of the AUD/USD pair. Market participants are monitoring geopolitical developments, trade tensions, and shifts in risk sentiment, as these can impact currency flows and investor confidence.

Technical analysis remains an essential tool for traders assessing the AUD/USD pair. The concentration of multiple Simple Moving Averages (SMAs) in close proximity highlights a critical zone that could determine the currency pair’s near-term direction. A sustained move above or below these SMAs may indicate the strength of bullish or bearish momentum.

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Support levels, such as the breakpoints at 0.6710, 0.6574, and 0.6565, will be closely watched. If the AUD/USD pair breaches these levels, it may indicate a deeper correction is underway. On the other hand, a rebound from these support levels could suggest a potential resumption of bullishness.

Conclusion

In conclusion, the Australian Dollar’s softening after its recent bull run has caught the attention of market participants. The upcoming RBA meeting, along with global events, will shape the AUD/USD pair’s trajectory. Traders will continue to monitor support levels, technical indicators, and key economic data to gain insights into whether the current pullback is a temporary pause or a more significant reversal in momentum.

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