The likelihood of a Federal Reserve (Fed) rate cut in September has increased due to disappointing US economic data. Jobless claims were higher than expected, and the US services Purchasing Managers’ Index (PMI) unexpectedly fell into contraction territory. As a result, Treasury yields dropped and the US dollar reached a two-week low as calls for the Fed to focus more on economic growth intensified.
The AUD/USD pair saw a significant breakthrough as the US dollar weakened, pushing the pair to its highest level in some time. This move may indicate a break above a symmetrical triangle formation, supported by the daily relative strength index (RSI) holding above its key mid-line. The policy divergence between the Reserve Bank of Australia (RBA) and the Fed could provide further bullish momentum for the pair, with expectations that the RBA will not cut rates until 2025 due to recent pricing pressures. Buyers are eyeing the 0.686 level, while the 0.663 level is seen as immediate support.