• AUD/USD drops to near 0.7003 as the US Dollar trades higher.
• The Fed is expected to deliver three interest rate hikes this year.
• Investors await the Aussie CPI and employment data for May.

The Australian Dollar (AUD) trades slightly lower at around 0.7003 against the US Dollar (USD) during the European trading session on Monday. The Aussie pair faces slight selling pressure as the US Dollar (USD) outperforms its peers amid growing expectations that the Federal Reserve (Fed) will deliver at least two interest rate hikes this year.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 100.90.

Analysts at Bank of America (BofA) expect the Fed to deliver three interest rate hikes of 25 basis points (bps) in September, October, and December meetings, a sharp turnaround from the anticipation that the central bank will stand pat this year.

“The data simply don't warrant cuts this year. Core inflation is too high and moving up. The solid April jobs report was the last straw, especially given hawkish Fedspeak," BofA said.

On the Australian Dollar front, investors await the Consumer Price Index (CPI) and employment data for May, which will be released on Wednesday and Thursday, respectively.

AUD/USD technical analysis

AUD/USD trades marginally lower at around 0.7003, maintaining a bearish near-term tone as it holds below the 20-period exponential moving average (EMA) at 0.7069 and beneath the former rising trend-line break point near 0.7096, both now acting as overhead supply.

The Relative Strength Index (RSI) around 37 lingers in bearish territory, suggesting downside pressure persists even as the pair consolidates near the 0.7000 handle.

On the topside, initial resistance is seen at the 20-EMA around 0.7069, with the broken ascending trend-line at 0.7096 following as a secondary cap that reinforces the broader corrective structure. A daily close above these levels would be needed to ease the current bearish bias and open the door for a deeper recovery, while failure to reclaim them keeps AUD/USD vulnerable to further weakness towards new lows below 0.7000.

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