Australian Dollar eases from four-month high

The Australian Dollar eased against the US Dollar on Thursday, slipping below the 0.7200 mark after reaching its highest level since mid-May earlier in the week. The AUD/USD traded in the 0.7160 area, lower on the day, as a stronger US Dollar moved the pair away from a recent peak around 0.7220. Beijing reportedly prepared a $54 billion stimulus package to support its banking and financial sector, giving the Australian Dollar a boost.

The pair had climbed sharply from the June trough before the recent pullback. Support came from the Reserve Bank of Australia (RBA), with hawkish comments from officials and oil near $100 a barrel pushing traders to price in a rate rise later in the month. Higher Australian rates versus other central banks tend to support the currency.

Short-dated yields also strengthened, as expectations shifted. Investors now believe the Federal Reserve may raise rates in September, given the Producer Price Index (PPI) rose 5.4% year-over-year in August, which is considered hot. The Middle East conflict and soaring oil prices are keeping inflation elevated, which is pushing the US Dollar higher and taking some strength out of the Aussie Dollar.

On the 4-hour chart, AUD/USD traded at 0.7167, maintaining a bearish short-term outlook as it held beneath both the 100-period Simple Moving Average (SMA) and the 20-period SMA. The latest Relative Strength Index (RSI) reading of 29 indicated the currency pair was still oversold, suggesting downside pressure even as it approached a nearby support level.

Immediate support was at the horizontal floor at 0.7157, with a break exposing lower levels and extending the corrective phase. Initial resistance was at the 100-period SMA around 0.7174, followed by the horizontal cap at 0.7193, with further barriers at 0.7213 and the 20-period SMA near 0.7215 before higher resistance at 0.7223.