Australian dollar rises on record high gold and rising commodity prices

Current market development

Recent news surrounding the AUD suggests a possible continuation of its winning streak against the USD. The release of the Reserve Bank of Australia (RBA) August meeting minutes, which indicated a stable policy rate for an extended period, has supported the AUD. The RBA's decision to keep the rate on hold reflects a careful approach to balancing economic risks, which has been well received by the market. This cautious optimism about the RBA's policy is likely to further strengthen the AUD, especially as investors interpret the central bank's stance as supportive of the Australian economy's current growth trajectory.

In addition, the AUD's position is also influenced by external factors, particularly developments in China, Australia's largest trading partner. The People's Bank of China (PBoC) has left its loan prime rates (LPRs) unchanged, indicating stability in the Chinese economy. Since Australia's economy is closely linked to China's due to their strong trade ties, positive signals from China tend to boost the AUD. The PBoC's decision not to change interest rates reassures markets that China's economic policies remain supportive, indirectly benefiting the Australian dollar. Therefore, the stable outlook in China and the RBA's decision could lead to continued upward pressure on the AUD/USD pair.

On the other hand, the US dollar is under downward pressure due to recent comments from Federal Reserve officials suggesting possible rate cuts in the near future. This dovish tone from the Fed contrasts with the more aggressive stance of the RBA, further widening the interest rate differential in favor of the AUD.

As a result, the AUD could become more attractive to investors, leading to increased demand and further appreciation of the AUD/USD pair. In addition, markets will closely monitor upcoming data releases and Fed Chair Jerome Powell's Jackson Hole speech, as any confirmation of softer US monetary policy could further weaken the USD and strengthen the AUD.

From a technical perspective, the USD Index is attempting to break the strong support level of a triangle pattern, which could trigger a significant decline in the US dollar and strengthen the AUD/USD pair. However, this is a strong support region and the USD Index must close below this red line on a weekly basis to confirm the breakout.