The AUD/USD pair faced renewed selling pressure, causing a decline of 0.40% to 0.6705 in Tuesday’s session. This decrease was influenced by the US Dollar gaining strength, reaching two-month highs due to increased risk aversion and concerns about China’s economic situation. The economic unrest in China has been a significant factor in unnerving investors and prompting them to seek safety in the US Dollar. Meanwhile, the market is anticipating a 25-basis-point rate cut by the Reserve Bank of Australia (RBA) by the end of the year.
The Australian Dollar has suffered from a lack of confidence in the US Dollar and skepticism regarding China’s stimulus measures. Additionally, a drop in copper prices has added downward pressure on the Aussie, while iron ore prices have remained relatively stable. Deflationary concerns have deepened in China, casting doubts on the effectiveness of the country’s stimulus efforts. Market sentiment indicates a 55% likelihood of a 25 bps rate cut by the RBA by the end of the year.
The technical outlook for the AUD/USD pair is bearish, with indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) signaling increased selling pressure. The RSI stands at 36, indicating strong selling pressure that is intensifying, while the MACD suggests rising bearish pressure. Key support levels to monitor include 0.6700, 0.6680, and 0.6650, while resistance levels include 0.6750, 0.6760, and 0.6780.
The Reserve Bank of Australia (RBA) plays a crucial role in setting interest rates and managing monetary policy for Australia. The primary mandate of the RBA is to maintain price stability, full employment, and economic prosperity for the Australian people. The RBA achieves this through decisions on interest rates, quantitative easing, and tightening. Macroeconomic data, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys, can influence the value of the Australian Dollar. QE is used as a tool to provide liquidity to financial institutions, potentially weakening the value of the AUD, while QT can have a positive impact by strengthening the currency.
In conclusion, the AUD/USD pair faces downward pressure due to renewed selling pressure and concerns about China’s economic situation. The technical outlook suggests a bearish momentum in the near term, with key support and resistance levels to watch. The RBA’s role in managing monetary policy and interest rates is crucial for the Australian economy and the value of the Australian Dollar. Investors should keep a close eye on market sentiment and economic indicators to gauge the future direction of the AUD/USD pair.
