The AUD/USD has continued its downward trend, falling back to the key 0.6500 region after a brief uptick on Wednesday. The Australian dollar remains below the critical 200-day SMA against the US Dollar, making it susceptible to further losses in the near term.
This decline in the pair can be attributed to a strong rebound in the US Dollar post-FOMC weakness, along with negative economic news from China, a drop in commodity prices, and a recent interest rate cut by the People’s Bank of China (PBoC).
The PBoC’s rate cut has weakened the Chinese yuan, impacting the Australian dollar due to their economic ties. Additionally, weak iron ore and copper prices have added to the pressure on the Aussie dollar.
Recent inflation data in Australia has reduced expectations of further tightening by the Reserve Bank of Australia (RBA). The central bank is likely to keep rates unchanged at 4.35% in its upcoming meeting, with no rate hikes expected for the rest of the year.
While the RBA is expected to be the last G10 central bank to cut rates, potential easing by the Federal Reserve could provide some support for the AUD/USD. However, challenges in the Chinese economy may hinder a significant recovery of the Australian dollar.
In terms of data, Australia’s trade surplus widened in June, and the Judo Bank Manufacturing PMI improved in July.
Technical Outlook for AUD/USD
In the short term, the AUD/USD may find support at 0.6479 and 0.6465, with resistance at 0.6590 and 0.6602. Further losses are expected as long as the pair remains below the 200-day SMA.
On the four-hour chart, the downward bias is accelerating, with support at 0.6479 and resistance at 0.6573. The RSI is around 43, indicating a bearish sentiment.
In conclusion, the AUD/USD is facing downward pressure due to a strong US Dollar, weak economic indicators in China, and limited tightening by the RBA. Investors should monitor these factors closely to make informed decisions about their investments in the currency pair.