The Australian Dollar (AUD) experienced a minor pullback against the US Dollar (USD) during Monday's trading session, yet it continues to retain its underlying bullish momentum. The AUD/USD pair was changing hands at 0.7164, sitting just a few pips below the 12-week peak of 0.7180 that was reached late last Friday. While a mild risk-aversion sentiment across global markets is placing some downward pressure on the Aussie currency, the US Treasury department's announced initiative to repurchase long-term securities is simultaneously capping the advancement of USD bulls.
Inflation Data and Interest Rate Expectations
Market analysts at Wells Fargo note that the Australian currency continues to find strong backing as investors patiently await the release of Australia's upcoming Consumer Price Index (CPI) figures. This upcoming data release is expected to clarify whether the moderation in inflation observed back in June can be sustained moving forward. Experts at Wells Fargo project that headline inflation will increase by 1.0% over the course of July, which would bring the year-over-year rate down to 3.4%, while the trimmed mean inflation is anticipated to hold steady at 3.6% annually. Bank strategists pointed out in a published note that a rate hike in September or during the fourth quarter remains entirely possible if inflationary pressures persist and domestic demand conditions continue showing resilience.
Technical Outlook and Key Price Levels
Technical indicators currently suggest that the recent upward rally may be slightly overextended, pointing toward the distinct possibility of a deeper downward correction in the near term. Bearish traders will likely encounter significant hurdles near the previous resistance area of 0.7130, which marked highs between August 17 and August 20, just ahead of the August 19 low situated right below 0.7070. On the upside, immediate resistance is clearly defined around the 0.7200 psychological barrier, a zone that successfully capped gains throughout late May and early June. Should the exchange rate break decisively above this threshold, the next notable upside target points toward the year-to-date peak near 0.7280.
Broader Currency Market Movements
Across the wider foreign exchange landscape, other major currency pairs are reacting to shifting macroeconomic crosscurrents. The GBP/USD pair kicked off the new week trading with a negative bias around the mid-1.3600s, as the US Dollar regains lost ground driven by growing uncertainty surrounding potential US economic sanctions against Iran. Concurrently, the EUR/USD pair trades defensively below the 1.1700 handle during European trading hours. Meanwhile, gold prices hover near a three-month high close to $4,650 per ounce, taking full advantage of persistent greenback weakness following the US Treasury bond buyback announcement and fresh trade tensions between the US and Canada.
US Treasury Liquidity Support Measures
In a notable policy adjustment outside its standard operating calendar, the US Treasury Department announced on Wednesday a significant expansion of its financial market operations. At 12:32 GMT, the department revealed plans to at least double the liquidity support buyback operations targeting the 10-year to 20-year and 20-year to 30-year maturity sectors. This adjustment lifts the maximum operational size from $2 billion per transaction to a minimum of $4 billion, with the program scheduled to run from September 9 through November 4.
