AUD/USD Breaks Higher as US Dollar Extends Decline Toward Key Support

The Australian dollar has finally broken above a key resistance level, propelled by renewed rate cut bets for the Federal Reserve and bullish technical momentum. With AUD/USD pushing toward the 0.66 handle and the US dollar index (DXY) approaching critical support, traders are watching for potential follow-through or short-term shakeouts. This breakout could mark the beginning of a more sustained upside for the Aussie, especially as the Fed’s dovish shift gathers pace.

Australian Dollar Breakout Gains Momentum as US Dollar Weakens

We’ve finally seen the Australian dollar break out and clear the long-term 61.8% Fibonacci retracement level at 0.6550 on the AUD/USD chart. As noted yesterday, I suspected a bullish breakout was brewing following a multi-week grind higher, supported by renewed Federal Reserve rate cut bets and a weekly bullish engulfing candle on AUD/USD.

View related analysis:

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

Prices are now just pips away from the 0.66 handle — a level likely to be tested today. The daily RSI (14) has broken above trend resistance but remains below overbought territory, suggesting room for further upside. The Aussie dollar could now be targeting the 200-week simple moving average (SMA) at 0.6724, near the weekly volume point of control (VPOC) at 0.6733. The 0.6760 area also shapes up as a probable resistance zone.

Chart analysis by Matt Simpson - Source: TradingView

However, with the US Dollar Index (DXY) nearing key support and Australia’s 3-year yield reclaiming its head and shoulders neckline, a brief shakeout near 66c or a minor pullback would not surprise. Still, the trend structure remains favourable, and AUD/USD bulls may look to buy dips towards 0.65 — near a weekly VPOC — should any such pullback occur.

US Dollar Index (DXY) Technical Analysis

Chart analysis by Matt Simpson - Source: TradingView / ICE

The US dollar index (DXY) has been in decline since peaking at 109.23 on January 16, now down -11.8% — marking its sharpest drawdown since the 2022 high. Given the sustained downward trajectory, the selloff appears poised to continue. Friday’s bearish engulfing candle suggests a lower high beneath the 200-day simple moving average (SMA), and DXY is now testing the 2023 low at 96.28.

Some price noise around this level wouldn’t be surprising, and that could momentarily temper the Australian dollar's upside. Still, the broader bias for AUD/USD remains bullish, with dips likely to attract buyers.

Chart analysis by Matt Simpson - Source: TradingView / ICE

Technically, DXY is approaching the minimum target of a head and shoulders (H&S) top pattern near 95.73. However, further weakness could push the index towards the high-volume node (HVN) at 91.74 in the coming weeks — particularly if Fed Chair Powell yields to political pressure and soft economic data triggers a dovish policy shift.

Economic Events in Focus (AEST / GMT+10)

08:00 NZD NZIER Business Confidence (Q2), NZIER QSBO Capacity Utilization (Q2) (NZD/USD, NZX 50)
08:45 NZD Building Consents (May) (NZD/USD, NZX 50)
09:00 AUD Judo Bank Manufacturing PMI (Jun) (AUD/USD, ASX 200)
09:01 GBP BRC Shop Price Index (GBP/USD, FTSE 100)
09:50 JPY Tankan Survey (Q2) (USD/JPY, Nikkei 225)
10:30 JPY au Jibun Bank Manufacturing PMI (Jun) (USD/JPY, Nikkei 225)
11:45 CNY Caixin Manufacturing PMI (Jun) (USD/CNH, China A50)
13:35 JPY 10-Year JGB Auction (USD/JPY, Nikkei 225)
15:00 JPY Household Confidence (Jun) (USD/JPY, Nikkei 225)
17:30 CHF Manufacturing PMI (Jun) (USD/CHF, SMI)
17:55 EUR German Manufacturing PMI (Jun), German Unemployment (Jun) (EUR/USD, DAX)
18:00 EUR Eurozone Manufacturing PMI (Jun) (EUR/USD, Euro Stoxx 50)
18:30 GBP S&P Global Manufacturing PMI (Jun) (GBP/USD, FTSE 100)
19:00 EUR CPI & Core CPI (Jun) (EUR/USD, DAX)
22:55 USD Redbook (YoY) (USD, S&P 500, Nasdaq 100, Dow Jones)
23:30 GBP BoE Gov Bailey Speaks (GBP/USD, FTSE 100)
23:30 USD Fed Chair Powell Speaks (USD, S&P 500, Nasdaq 100, Dow Jones)
23:30 JPY BoJ Gov Ueda Speaks (USD/JPY, Nikkei 225)
23:30 EUR ECB President Lagarde Speaks (EUR/USD, DAX)
23:45 USD S&P Global Manufacturing PMI (Jun) (USD, S&P 500, Nasdaq 100, Dow Jones)
00:00 USD ISM Manufacturing PMI (Jun), Construction Spending (May), JOLTS Job Openings (May) (USD, S&P 500, Nasdaq 100, Dow Jones)

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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