The AUDUSD currency pair has been experiencing significant fluctuations recently, influenced by a combination of economic data, geopolitical factors, and market sentiment. The Aussie Dollar has faced headwinds, shedding over 1.6% week-to-date as the Reserve Bank of Australia (RBA) signalled that its interest rate may have already peaked, while the US Dollar has been attracting safe-haven flows and benefiting from more robust employment data.
Global risk aversion has also been at play, triggered by events such as the US sovereign rating downgrade, disappointing stimulus measures from Beijing, and broader macroeconomic uncertainties. As a result, investors turned to safe-haven assets like the US Dollar, putting downward pressure on the AUDUSD pair.
However, China’s services sector slightly faster expansion in July, defying expectations of a decline and better-than-expected Australian balance of trade data, provided some support to the pair during the session. This data initially boosted the AUDUSD pair, but the impact was short-lived as concerns over the global economic environment and weak export business weighed on the Australian Dollar.
Technical
The 4H chart shows that the AUDUSD pair, currently trading at 0.65369, has recently broken below a descending channel trading pattern, indicating a bearish trend. The price action is below both the 50-EMA(blue line) and the daily pivot point, further confirming the downward momentum.
The pair found immediate support at the 0.65255 price level, and if this support holds, there may be a short-term bounce. However, the technical outlook remains bearish, with potential support levels at the 31st of May 2023 low of 0.64584 and the 10th of November 2022 low of 0.63862.
On the upside, the immediate resistance is at the 23.60% Fibonacci retracement level of 0.65951, followed by the next resistance at 0.66938.
Summary
Given the fundamental and technical factors, a cautious and bearish outlook on the pair is warranted. The recent economic data from China provided a brief respite, but the overall sentiment remains weak. With the risk aversion prevailing and the market expecting further monetary divergence between the RBA and the US Federal Reserve, the Australian Dollar is likely to face downward pressure against the US Dollar.
Therefore, short-term trading opportunities could exist as the bearish momentum persists, with the support level at 0.65255 likely acting as the initial target, followed by potential moves towards 0.64584 and 0.63862. However, monitoring developments in China, global economic conditions, and the US Dollar’s performance is crucial, especially with the upcoming NFP report due on Friday, as these factors can influence short-term market dynamics.
Sources: TradingView, Reuters, Trading Economics, Dow Jones Newswire.
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