Australian Dollar climbs to two-month highs amid a soft US Dollar

• The US Dollar is deeply out of favor, with August's run of soft data denting the case for a September Fed move.
• China's July Industrial Production and Retail Sales both came in weaker than the prior month and below forecasts, pointing to slowing domestic activity.
• AUD/USD is looking past the poor Chinese numbers and leaning on the Greenback's weakness.

AUD/USD extended its recovery on Monday, pushing to fresh 10-week highs and holding near the 0.7100 zone. At the time of writing, the pair is 0.40% up for the day, driven almost entirely by a broadly weak US Dollar (USD) rather than anything positive out of Australia.

The Greenback is on the back foot across the board. The batch of US data released so far in August on employment, inflation, and retail sales has consistently come in soft, and that has pared back expectations that the Federal Reserve (Fed) will raise rates at its September meeting. The Fed held its benchmark at 3.50%-3.75% in early August, with three officials dissenting in favor of a hike on inflation concerns.

Several Chinese releases landed between Sunday night and early Monday, including Industrial Production and Retail Sales. Both slowed from the previous month and missed expectations, a combination that points to slowing domestic activity in China. Factory output grew 4.5% in July, down from June and short of forecasts, while retail sales growth cooled to 0.6%.

For a currency as tied to Chinese demand as the Aussie, that would normally be a drag. Instead, AUD/USD has brushed the numbers aside, a sign of just how one-sided the story is right now, with the weak Greenback overriding everything else.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7115, preserving a bullish near-term bias as it holds above the 20-period Simple Moving Average (SMA) at 0.7077 and the 100-period SMA at 0.7030. The pair is also trading just over horizontal support at 0.7108, while the Relative Strength Index (RSI) stands near 69, suggesting strong but slightly overbought upside momentum that could slow the advance without necessarily reversing it immediately.

On the topside, immediate resistance emerges at 0.7124, followed by a dense barrier at 0.7127 and 0.7129, where sellers are likely to defend the recent push higher. On the downside, initial support is seen at 0.7108, with the 20-period SMA at 0.7077 and the 100-period SMA near 0.7030 expected to act as deeper demand levels if a corrective pullback unfolds.

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