The Australian Dollar Faces Uphill Battle Against US Dollar
The AUD/USD pair has been struggling in the low 0.6600s, facing persistent pressure as the US Dollar experiences some profit taking and a mild bounce in the risk complex.
Factors Contributing to AUD/USD Weakness
- The critical 200-day SMA continues to hold the downside for the AUD/USD pair.
- Lacklustre performance of the US Dollar due to profit-taking.
- Broad-based tepid recovery in the risk-associated galaxy.
- Scepticism surrounding the implementation of Chinese stimulus measures.
- Significant drop in copper prices contrasting with slight gains in iron ore prices.
Despite the Reserve Bank of Australia (RBA) holding its cash rate steady at 4.35% during its September meeting, market sentiment suggests a 50% chance of a rate cut by year-end. However, Deputy Governor Andrew Hauser cautions that expectations for significant RBA easing might be too high, as Australian rates may not fall as much or as quickly as other central banks.
Possible rate cuts by the Federal Reserve later this year could provide support to the AUD/USD pair, but uncertainties surrounding China’s economic outlook remain a concern.
Short-Term Technical Outlook for AUD/USD
Extra losses might push the AUD/USD to its October low of 0.6613, ahead of the 2024 bottom of 0.6347. On the upside, there is an interim obstacle at the 55-day SMA of 0.6739 before reaching the 2024 peak of 0.6942 and the key 0.7000 barrier.
The four-hour chart indicates that the negative leg remains well in place. Initial support is at 0.6613, followed by 0.6560 and 0.6347. On the upswing, the first resistance level is the 55-SMA at 0.6688, seconded by 0.6723 and the 200-SMA at 0.6762. The RSI fell to around 36.
Analysis of AUD/USD Performance
The AUD/USD pair’s struggle against the US Dollar reflects a combination of factors impacting both currencies and the global economic landscape. The ongoing pressure on the Australian Dollar highlights the challenges faced by the country’s economy, including uncertainties surrounding China’s economic outlook and the potential for RBA rate cuts.
For investors and traders, monitoring the AUD/USD pair’s performance provides valuable insights into market sentiment, economic trends, and potential investment opportunities. Understanding the technical outlook for the pair helps in making informed decisions regarding currency trades and risk management strategies.
Overall, the AUD/USD pair’s performance is not just a reflection of currency movements but also a barometer of broader economic conditions and policy decisions that can impact financial markets globally. Keeping a close eye on developments in the Australian economy, RBA policies, and global economic trends is essential for anyone with a stake in the financial markets.