The AUD/USD pair has plummeted to new two-month lows near the 0.6500 level, marking a significant decline over the past few days. This downtrend can be attributed to various factors, including poor economic prospects from China, falling commodity prices, intermittent US Dollar strength, and the recent interest rate cut by the People’s Bank of China (PBoC).
China’s unexpected rate cut weakened the Chinese yuan, which in turn negatively impacted the Australian dollar due to their economic ties. Additionally, the ongoing weakness in copper and iron ore prices has contributed to the AUD’s decline, reflecting a broader downturn in the commodity sector.
While the Reserve Bank of Australia (RBA) has maintained a hawkish stance on monetary policy, concerns about a potential labor market slowdown have prevented them from implementing a rate hike. The RBA is expected to be the last G10 central bank to start cutting interest rates, with a focus on keeping inflation within the target range of 2-3%.
Looking ahead, potential easing by the Federal Reserve (Fed) could support AUD/USD in the coming months, but the slow momentum in the Chinese economy may hinder a sustained recovery of the Australian dollar. Challenges such as deflation and insufficient stimulus in China could pose obstacles to the AUD’s resurgence.
AUD/USD Short-Term Technical Analysis
In the short term, the AUD/USD pair could find support at the July low of 0.6513, followed by the May low of 0.6465. On the upside, resistance levels include the 200-day SMA at 0.6585, the 100-day SMA at 0.6606, and the July top of 0.6798.
Overall, the outlook for AUD/USD remains bearish as long as it stays below the 200-day SMA. The four-hour chart also shows a negative bias, with support at 0.6513 and resistance at 0.6610.
It is essential for investors to monitor economic developments in China and the US, as well as the RBA’s monetary policy decisions, to make informed decisions regarding the AUD/USD pair. By staying informed and analyzing market trends, investors can navigate the fluctuations in the currency market and make strategic investment choices.