The AUD/USD pair experienced a significant decline, breaking below the key 200-day SMA and dropping to the 0.6500 region, marking its lowest point in two months.
The downward trend was driven by concerns over the Chinese economy, declining commodity prices, strength of the US Dollar, and the recent interest rate cut by the People’s Bank of China.
The unexpected rate cut by the PBoC weakened the Chinese yuan, impacting the Australian dollar due to their economic ties and the AUD’s role as a proxy for the yuan.
Additionally, the ongoing weakness in copper and iron ore prices contributed to the decline in the AUD, reflecting a broader downturn in the commodity sector.
Despite the Reserve Bank of Australia maintaining a hawkish stance, there are expectations for a potential interest rate cut in the future to address inflation concerns and a slowing labor market.
Looking ahead, the Fed’s potential easing measures contrasted with the RBA’s restrictive stance could support the AUD/USD pair in the coming months. However, challenges in the Chinese economy post-pandemic could hinder a sustained recovery of the Australian dollar.
AUD/USD Short-Term Technical Outlook
In the short term, further losses in the AUD/USD pair may find support at the July low of 0.6513, with potential resistance at the 200-day SMA of 0.6587. Overall, a retracement in the pair is likely while below the 200-day SMA.
On the four-hour chart, there is a consolidative move expected with support at 0.6513 and resistance at 0.6610. The RSI indicator is around 38, indicating a neutral stance for the pair.
Analysis: The AUD/USD pair has seen a sharp decline due to Chinese concerns and weaker commodity prices. The ongoing economic challenges in China and the potential for interest rate cuts by central banks could impact the pair’s movement in the near future. Traders and investors should monitor developments in China and central bank policies to make informed decisions regarding the AUD/USD pair.