The AUD/USD Bearish Trend Continues Below 0.6700
- The US Dollar Maintains Bullish Bias, Reaches Multi-Week Tops
- Australian Labour Market Report Up Next for Consideration
In recent trading sessions, the AUD/USD pair faced increased selling pressure, breaking below the key support level at 0.6700 and hitting new five-week lows.
The bearish momentum in the Australian Dollar can be attributed to the continued strength of the US Dollar and ongoing skepticism surrounding China’s stimulus efforts, leading traders to exercise caution.
Despite marginal increases in copper and iron ore prices, the Aussie Dollar failed to reverse its decline, as doubts persisted regarding the effectiveness of China’s stimulus measures.
China Economic Struggles and RBA Monetary Policy
In China, deflation concerns have deepened, with recent data highlighting the country’s economic challenges. Uncertainty surrounding the scope and impact of upcoming stimulus initiatives has left investors uncertain about China’s economic outlook.
The Reserve Bank of Australia (RBA) maintained its cash rate at 0.35% during its September meeting. While inflation risks were acknowledged, Governor Michele Bullock emphasized that a rate hike is not currently under consideration.
Minutes from the RBA’s meeting signaled a more dovish stance compared to previous months, with indications of potential rate cuts in response to slowing economic growth and easing inflation pressures.
Market Sentiment and Future Rate Cut Expectations
Market sentiment suggests a 50% chance of a 25-basis-point rate cut by the end of the year. The RBA is anticipated to be one of the last G10 central banks to implement rate cuts, with economic uncertainties and inflation concerns influencing future monetary policy decisions.
Potential rate cuts by the Federal Reserve could aid in the recovery of the AUD/USD pair later in the year. However, uncertainties surrounding China’s economic trajectory and stimulus efforts remain key challenges.
Westpac’s Leading Index and RBA Monitoring
Westpac’s Leading Index for September showed no change on a monthly basis, with Assistant Governor Sarah Hunter emphasizing the RBA’s vigilance in monitoring inflation and global central bank policies.
Upcoming data releases include Westpac’s Leading Index and a speech by the RBA’s Hunter, providing further insights into Australia’s economic landscape.
AUD/USD Technical Outlook and Analysis
The AUD/USD pair may see further downside movement towards the October low of 0.6657, followed by the September low of 0.6622, with support from the key 200-day SMA.
On the upside, challenges lie at the 2024 high of 0.6942, approaching the critical 0.7000 level. The four-hour chart indicates a downtrend, with initial support at 0.6657 and resistance at 0.6758, 0.6772, and 0.6807.
The RSI has entered the oversold zone, signaling potential reversals in the near term.