In Monday’s trading session, the Australian Dollar (AUD) experienced a decline against the USD, with the AUD/USD pair starting the week at around 0.6640. This decrease can be attributed to the drop in Copper prices as well as the recent rate cut of 10 basis points by the People’s Bank of China. Market participants are now looking towards key economic indicators such as the revised Gross Domestic Product (GDP) Q2 figures, Personal Consumption Expenditures (PCE) from the US, and Judo PMIs from Australia to guide their trading decisions for the week.
Despite some weak economic indicators in Australia, the Reserve Bank of Australia (RBA) is reluctant to cut interest rates due to stubbornly high inflation. This cautious approach by the RBA has supported the stability of the Aussie currency and may prevent further declines in the near future. Unlike many other central banks in the G10 countries, the RBA has not shown any signs of easing its hawkish stance, which could continue to bolster the AUD’s recent gains.
The recent decision by the People’s Bank of China (PBoC) to adjust interest rates has also impacted the Australian Dollar. The PBoC set the 5-year interest rate at 3.85%, slightly lower than expectations, and the 1-year interest rate at 3.35%, also below forecasts. Additionally, the decline in Copper prices, a key Australian export, has further weighed on the Aussie currency. While strong employment figures were reported by the Australian Bureau of Statistics (ABS) last week, the slight increase in the Unemployment Rate to 4.1% has caught the attention of market participants awaiting the RBA’s reaction.
The market is currently anticipating a rate hike by the RBA in either September or November, with a 50% likelihood of such a move. This projection reflects the bank’s hawkish stance despite economic indicators suggesting a possible need for further stimulus. On the other hand, the Federal Reserve is expected to implement a rate cut in September, with a 90% likelihood currently priced in by the market. As new data from both countries continues to be released, these expectations are likely to evolve and shape the future direction of the AUD/USD pair.
From a technical analysis perspective, the AUD/USD pair has fallen below the 20-day Simple Moving Average (SMA) and is currently in a correction phase following a period of sharp gains in early July. The key support level at 0.6000-0.6040 is now being tested, and indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest that momentum is weakening. If the pair fails to hold above this support range, a further downside movement may be imminent.Traders and investors will be closely monitoring these technical signals, as well as upcoming economic data, to determine their trading strategies in the coming days.
