Breaking News: AUD/USD Plummets to Five-Week Lows Below 0.6700
- AUD/USD fell on Wednesday, reaching five-week lows below 0.6700.
- Markets await key employment figures from Australia in Thursday’s session.
- A stronger USD, worries from the Chinese economic situation, and falling metal prices are pushing down the Aussie.
The AUD/USD pair continued its downward spiral on Wednesday, plunging by 0.60% to 0.6662, hitting a five-week low. Breaking below the critical 0.6700 support level, the pair now faces a potential test of the 200-day SMA at 0.6625. The upcoming release of local employment figures on Thursday will play a crucial role in determining the future direction of the Australian dollar.
Market Analysis: Factors Driving AUD/USD Decline
- USD Strength: The strengthening US dollar is putting pressure on the Aussie currency.
- Chinese Economic Concerns: Worries surrounding the Chinese economy are contributing to the decline in AUD/USD.
- Falling Metal Prices: Declining metal prices are also weighing on the Australian dollar.
Despite a somewhat mixed economic outlook for Australia, the Reserve Bank of Australia’s (RBA) focus on tackling high inflation has tempered market expectations. Current projections indicate a modest 0.25% interest rate cut in 2024. However, if the upcoming employment data reveals weakness, market sentiment may shift towards anticipating another rate cut.
Technical Analysis: Bearish Momentum for AUD/USD
The AUD/USD pair is currently in a bearish trend with the Relative Strength Index (RSI) signaling oversold conditions. The Moving Average Convergence Divergence (MACD) is on the rise, indicating a bearish outlook for the currency pair.
Key support levels for AUD/USD include 0.6660, 0.6650, and 0.6630, while resistance levels are situated at 0.6700, 0.6730, and 0.6750.
Employment Figures: Impact on Currency Valuation
Labor market conditions play a crucial role in assessing an economy’s health and its currency’s value. High employment levels lead to increased consumer spending and economic growth, bolstering the local currency. Additionally, tight labor markets can impact inflation levels by driving up wages.
Central banks closely monitor wage growth data as it reflects household spending power and influences inflation rates. Wage growth is considered a key component of persistent inflation and guides monetary policy decisions.
While different central banks prioritize labor market conditions to varying degrees, these factors remain significant in shaping economic policies and inflation targets.