Despite lacklustre wage growth in the latest quarter and RBA meeting minutes suggesting an end to the rate hike cycle, the Australian dollar found strength against its US counterpart, buoyed by another rate cut from the PBoC, as attempts continue to stimulate the Chinese economy. With a lot of information to juggle, it was undoubtedly a tricky session for AUDUSD traders to navigate.
The RBA meeting minutes revealed that the board believes inflation could subside at the current rates, suggesting a potential end to the slew of rate hikes this year. In addition, quarterly wage growth in Australia stayed flat at 0.8% despite consensus for a slight rise to 0.9%. Theoretically, the slowdown in Chinese retail sales to 2.5% from the prior 3.1% should further weigh on the currency pair, as it missed the 4.5% consensus, while fixed asset investment slowed from 3.8% to 3.4%, against the forecast for an unchanged figure. However, the currency pair found strength close to 9-month lows as the PBoC cut China’s 1-year medium-term lending facility (MLF) from 2.65% to 2.5%, boosting hopes that the struggling economy could gain momentum again on looser monetary conditions.
Technical
On the 4H chart, a descending channel remains in play, as the price action found buyers at the dynamic support, triggering a breakthrough at the daily pivot point of $0.6482, potentially signalling a momentum reversal toward the upside.
However, resistance at $0.6509 (R1) could stand in the way of a sustained upside toward $0.6530 (R2), where the 50-day moving average of $0.6535 could prove a challenging barrier to break. In the case of a breakthrough at R2, the dynamic channel resistance could be vulnerable to an additional leg higher, where $0.6604 and $0.6642 could come into play.
If R1 and R2 prevent the bullish momentum from sustaining, the daily pivot could come back into the equation before support at $0.6464 gets reached. At this level, the channel’s dynamic support could break down, leading the currency pair toward $0.6424, the 161.8% Fibonacci extension from the mid-July peak.
Summary
With a lot of informational releases to juggle, the Asian session was a tricky one to navigate for the AUDUSD currency pair. While domestic data did not favour the Australian dollar, the PBoC provided much-needed relief with a policy cut to stimulate their economy. While the descending channel holds, resistance at $0.6530 could cap the upside momentum.
Sources: Koyfin, Tradingview
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