The AUD/USD pair delivers an upside break of the consolidation formed in a range of 0.6430-0.6450 in the European session. The Aussie asset picks strength as the US Dollar Index (DXY) eases ahead of the Federal Reserve (Fed) monetary policy, which will be announced on Wednesday.
Investors see the Fed keeping interest rates steady at 5.25-5.50% as inflation is consistently cooling while economic prospects are strong. The labor growth in the United States economy has remained steady despite higher interest rates from the Fed. The Fed is expected to keep interest rates higher long enough to ensure price stability.
Meanwhile, the Australian Dollar will remain in action amid the interest rate policy by the People’s Bank of China (PBoC), which will be revealed on Wednesday. A dovish interest rate stance is expected from the PBoC due to upside risks to deflation amid bleak household’ demand.
The US Dollar Index drops sharply below the crucial support of 105.00 and is expected to remain vulnerable ahead.
AUD/USD rebounds after discovering buying interest near the horizontal support plotted from August 17 low around 0.6364 on a two-hour scale. The Aussie asset stabilizes above the 50-day Exponential Moving Average (EMA), which trades around 0.6340. Potential resistance is plotted from August 15 high at 0.6522.
The Relative Strength Index (RSI) (14) jumps above 60.0, which indicates that the bullish impulse has been triggered.
A decisive break above August 15 high around 0.6522 will drive the asset to August 9 high at 0.6571. Breach of the latter will drive the asset towards August 10 high at 0.6616.
On the flip side, a fresh downside would appear if the Aussie asset will drop below August 17 low around 0.6360. This would expose the asset to the round-level support of 0.6300 followed by 03 November 2022 low at 0.6272.