The AUD/USD pair has climbed towards the 0.6550 mark during Thursday’s European session, supported by a hawkish stance from the Reserve Bank of Australia (RBA) and a corrective pullback in the US Dollar (USD) amid growing expectations of Federal Reserve (Fed) rate cuts.

RBA Governor Michelle Bullock delivered a strong signal regarding the potential for further interest rate hikes, emphasizing that the central bank remains vigilant about inflation risks. During a Q&A session at the Rotary Club of Armidale Annual Lecture, Bullock stated that the RBA would not hesitate to raise its Official Cash Rate (OCR) if necessary. She also noted that inflation is unlikely to return to the target range of 2–3% until the end of 2025, reinforcing the RBA’s commitment to maintaining a tight monetary stance.

Meanwhile, the broader market sentiment remains cautious, with fears of a potential global economic slowdown weighing on risk assets. The S&P 500 futures have posted some losses in the European session, reflecting the risk-averse mood. The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, has edged lower to near the 103.00 level as market participants factor in the possibility of an aggressive Fed policy easing in the near future.

Despite the uncertainties surrounding the US Dollar’s outlook, market participants are looking forward to the release of the United States Initial Jobless Claims data for the week ending August 2, scheduled for 12:30 GMT. Economists expect that the number of individuals claiming jobless benefits for the first time will drop to 240,000, slightly below the previous week’s figure of 249,000. This data will provide further insights into the current state of the US labor market and could influence the USD’s trajectory.

Trade Idea:

Consider buying AUD/USD near 0.6540 with a target of 0.6600, placing a stop-loss at 0.6510, taking advantage of the RBA’s hawkish stance and the USD’s corrective weakness.