- AUD/USD slips amid ongoing bearish sentiment, approaching key support level.
- Economic weakness in Australia intensifies rate-cut expectations for the RBA.
- Technical indicators suggest a potential correction, but bearish momentum remains dominant.
The Australian Dollar (AUD) encountered some selling pressure against the US Dollar (USD) on Monday, declining by 0.50% to 0.6480. During the European session, it fell to its lowest since November 2023 around 0.6350 as risk-off flows dominated the markets, while investors await Tuesday’s Reserve Bank of Australia (RBA) decision for further direction.
Despite persistent high inflation, recent data has pointed to weaknesses in the Australian economy. This has prompted markets to shift their expectations from a potential rate hike by the RBA to a rate cut by year-end. The RBA is expected to keep rates steady at 4.35% at its meeting on Tuesday, but investors will be closely monitoring the central bank’s policy guidance for any hints of a more dovish stance.
Daily digest market movers: Aussie down as markets digest PMIs ahead of RBA
- Australia’s July services and composite PMIs were weaker than expected, with the composite reading falling below 50 for the first time since January.
- The Melbourne Institute Monthly Inflation Gauge showed a decline in inflation to within the RBA’s target band.
- The RBA is expected to maintain a neutral policy stance despite inflation remaining above its target range.
- The highlight will be that the RBA will publish new sets of forecasts in its Statement on Monetary Policy, which will guide markets on the next interest rate bets.
AUD/USD technical analysis: Bears continue in command, correction still possible
The AUD/USD pair continues to trade beneath its key Simple Moving Averages (20, 100 and 200-day SMAs), indicating a prevailing bearish sentiment. The Relative Strength Index (RSI) also suggests bearishness, with values hovering between 30-37 in recent sessions. The Moving Average Convergence Divergence (MACD) maintains red bars, further reinforcing the negative momentum.
However, the AUD/USD pair has found some support near the 0.6480 and 0.6350 levels, which could potentially act as a temporary floor. Resistance is anticipated around the 0.6560-0.6570 zone, where selling pressure has previously capped rallies.
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