Australian Dollar retreats from a monthly high

AUD/USD trades lower near the 0.7010 area on Tuesday, although the pair has retreated from its four-week high. The Australian Dollar (AUD) remains above the psychological 0.7000 level as softer United States (US) economic data limits demand for the US Dollar (USD).

The Greenback remains broadly steady as investors balance escalating tensions in the Middle East against signs that United States (US) inflation is cooling. Geopolitical uncertainty and higher Oil prices continue to generate safe-haven demand, but recent inflation figures have reduced expectations of further aggressive Federal Reserve tightening. The US Dollar Index (DXY) holds close to the 101.00 area after reaching its highest level since July 15.

US Consumer Price Index inflation declined 0.4% MoM in June, while the annual rate moderated to 3.5%. The softer inflation backdrop was reinforced by weaker producer-price figures, helping the Aussie withstand the US Dollar’s geopolitical support.

US labor market indicators also showed some moderation. The ADP Employment Change four-week average declined to 16.5K from a revised down 19.25K, suggesting that private-sector hiring momentum continues to soften. The result prevented the Greenback from extending its recovery and helped AUD/USD remain above 0.7000.

Investors will now turn their attention to Australia’s June employment report on Thursday. Employment is expected to increase by 15K after rising by 40.3K previously. The Unemployment Rate is forecast to remain unchanged at 4.4%, while the Participation Rate is also expected to hold at 66.7%.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7007, holding above both the 20-period Simple Moving Average (SMA) at 0.6998 and the 100-period SMA at 0.6946, which keeps the near-term bias mildly bullish. Price is also supported by the nearby horizontal floor at 0.7003, while the Relative Strength Index (RSI) around 57 suggests constructive but not overextended momentum as the pair consolidates just under the recent highs.

On the topside, initial resistance is seen at 0.7014, followed by a tighter cap at 0.7019, where recent supply has emerged. On the downside, immediate support aligns at 0.7003, ahead of the 20-period SMA at 0.6998 and a secondary horizontal level at 0.6997, with the 100-period SMA far below at 0.6946 reinforcing the broader bullish structure as long as it remains intact.

(The technical analysis of this story was written with the help of an AI tool. Know more.)