The AUD/USD currency pair has dropped precipitously. This decline follows the lately dovish minutes from the Reserve Bank of Australia (RBA) and underwhelming Purchasing Managers’ Index (PMI) figures out of China. Consequently, the pair has found new willing sellers around the key 0.6500 psychological mark. This bearish movement is a function of persistent and prevailing market uncertainty and traders’ indecision about the direction of the next major move.
In the last trading session, the AUD/USD pair continued to move down, with markets reacting to the RBA’s dovish approach. The federal bank’s recent FOMC minutes expressed a dovish stance towards any future interest rate increases, causing investors to rethink their bets. Disappointing PMI data from China has added to the bearish sentiment surrounding the Australian dollar, given its close ties to Chinese economic performance.
Today the AUD/USD pair is floating around 0.6500. Analysts think that in case of an upward movement, the top might be at 0.6600. Nevertheless, there will be a major resistance burden at 0.6640. Should the pair convincingly trade below the 0.6400 level, this might cause further selling pressure. Bearish traders are sure to take the opportunity to profit from a short-term turn bearish.
Given the current market dynamics, the AUD/USD pair looks primed for further downside. Look for a pull back continuation towards the 100-day Simple Moving Average (SMA) located in the 0.6330-0.6325 vicinity. This technical indicator acts as a key psychological support level, which traders will be specifically watching.
Traders have exhibited outstanding indecision during the past four weeks. This range-bound price action shows how uncertain traders are about what the next big move will be for the AUD/USD currency pair. This period of uncertainty precedes important economic releases that could impact market sentiments. All eyes now turn to Wednesday’s quarterly Australian GDP report. This information is likely to pin point further needed details about the country’s economic performance.
Look for key U.S. macroeconomic releases to accompany Australian data in the mix. Perhaps the most anticipated number of the month, Nonfarm Payrolls (NFP), is due out this Friday. Both of these reports are sure to drive sentiment and trading behavior for each currency pair.
The U.S. dollar, though under tremendous pressure overall, has recently seen a modest recovery from its multi-week lows. The subsequent market recovery has placed additional pressure on the AUD/USD pair. The dollar’s gains have reversed part of its previous slide to its lowest level since April 22, creating further challenges for the Australian dollar.
These worries about the United States’ fiscal outlook greatly restrain bearish impetus for the dollar taking off. On the flip side, this predicament might provide more backing for AUD/USD. The interaction of these elements demonstrates a challenging market landscape in which traders have to operate within the confines of both national and global pressures.
Spot prices have fallen back to the mid-0.6400s during the early European morning. This drop has undone most of the progress made yesterday. Traders remain on the lookout for further signals. Daily chart as of August 21, 2023. Slightly positive oscillators on the daily chart suggest that the AUD/USD pair is likely to move to an upside breakout.
We’ll need to keep our antennae up, participants in the market. Over the short-term, these fluctuations can turn sentiment and price action in a dramatic direction. The interplay of economic data releases and central bank communications will likely continue to shape trading strategies in the days ahead.