Title: AUD/USD climbs above 0.7000 as DXY tumbles below 106.00, US PCE buzz

July 29, 2022 12:48 AM ET

By: AnalysisWatch

The AUD/USD pair has significantly surpassed the psychological resistance level of 0.7000 and reached a daily high of 0.7015 in Tokyo trading. The asset saw some significant offers as the US Dollar Index (DXY) breached the five-day support level of 106.00.

The DXY hit a fresh three-week low of 105.84 and is expected to weaken further as investors are forced to dump the asset due to the ongoing contraction in the US economy.

On Thursday, the U.S. Bureau of Economic Analysis reported annual gross domestic product (GDP) of -0.9%, an improvement from the previous decline of 1.6% but below expectations of 0.5%. This has revived recession fears in the US economy.

A contraction in economic activity at a time when Federal Reserve (Fed) policymakers are busy trying to combat accelerating price pressures will dampen behavior on the street.

In today's session, investors will be keeping an eye on U.S. personal consumption expenditures (PCE) data, which is expected to come in at 6.7%, higher than the previous reading of 6.3%. This will lead to further tightening of monetary policy by the Fed.

On the Australian front, investors are waiting for the Reserve Bank of Australia (RBA) to announce its interest rate decision, which is due on Tuesday. According to a Reuters poll, RBA Governor Philip Lowe could prescribe a third consecutive 50 basis point (bps) rate hike.