AUD/USD Recovery Materializes amid Failed Attempt to Test May Low

Australian Dollar Outlook: AUD/USD

AUD/USD appears to have staged a failed attempt to test the May low (0.6357) as it continues to recover from a fresh monthly low (0.6373), but data prints coming out of Australia may drag on the exchange rate as the Consumer Price Index (CPI) is anticipated to show slowing inflation.

AUD/USD Recovery Materializes amid Failed Attempt to Test May Low

AUD/USD continues to defend the V-shape recovery from earlier this year as it extends the rebound from the start of the week, and the exchange rate may further retrace the decline from the monthly high (0.6552) as it snaps the series of lower highs and lows carried over from last week.

Australia Economic Calendar

However, the update to Australia’s CPI may sway AUD/USD as the headline reading for inflation is expected to narrow to 2.3% in May from 2.4% per annum the month prior, and evidence of easing price growth may push the Reserve Bank of Australia (RBA) to further unwind its restrictive policy as ‘underlying inflation is now expected to be around the midpoint of the 2–3 per cent range throughout much of the forecast period.’

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As a result, speculation for another RBA rate-cut may curb the recent recovery in AUD/USD, but a higher-than-expected CPI print may generate a bullish reaction in the Australian Dollar as it encourages Governor Michele Bullock and Co. to keep interest rates on hold at the next meeting in July.

With that said, AUD/USD may appreciate over the remainder of the month as it no longer carves a bearish price series, but the exchange rate may struggle to retain the V-shape recovery from earlier this year if it fails to defend the advance from the May low (0.6357).

AUD/USD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; AUD/USD on TradingView  

• AUD/USD bounces back ahead of the May low (0.6357) to approach the monthly high (0.6552), with a move/close above the 0.6510 (38.2% Fibonacci retracement) to 0.6550 (61.8% Fibonacci retracement) zone bringing the November high (0.6688) on the radar.
• Next area of interest comes in around 0.6720 (78.6% Fibonacci retracement), but AUD/USD may stage further attempts to test the May low (0.6357) if it struggles to hold/close above 0.6430 (50% Fibonacci retracement).
• A breach of the May low (0.6357) opens up 0.6310 (38.2% Fibonacci retracement), with the next area of interest coming in around 0.6130 (23.6% Fibonacci retracement) to 0.6160 (23.6% Fibonacci retracement).

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--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong