The AUD/USD pair experienced a drop, adjusting to 0.6950, due to a USD recovery, strong Australian PMIs, and the hawkish views of the Reserve Bank of Australia (RBA). The pair saw a moderate decline on Thursday after a significant rally in the previous sessions. The narrative of monetary policy divergence between the Federal Reserve (Fed) and the RBA has been a key driver of the pair’s movement, with the USD staging a recovery ahead of Jerome Powell’s speech at the Jackson Hole Symposium. Despite mixed Australian economic outlook, the market anticipates minimal easing by the RBA, supporting the Aussie against the Greenback. Softening US labor market data and S&P PMIs suggest a less assertive stance by the Fed, potentially leading to a depreciation of the USD.
Preliminary August PMIs from Australia paint a strong picture of the economy, with manufacturing, services, and the composite index showing positive growth compared to July. This development aligns with the RBA’s hawkish policy stance, indicating strong economic performance in Australia. However, the path of the pair will continue to be guided by incoming data from both countries, with markets expecting a September cut by the Fed.
Technical Analysis of AUD/USD Pair
Technical analysis suggests that the AUD/USD pair has maintained an upward trajectory with significant volume increase, indicating a positive outlook. The Relative Strength Index (RSI) shows a slightly bullish sentiment, with ongoing bullish pressure below the overbought level. The Moving Average Convergence Divergence (MACD) indicator also supports this bullish tone. The pair has consolidated above the 0.6700 support level, with critical resistance at around 0.6760-0.6800.
The Australian Dollar (AUD) is influenced by various factors, including interest rates set by the RBA, the price of iron ore (Australia’s biggest export), the health of the Chinese economy, inflation in Australia, growth rate, trade balance, and market sentiment. The RBA plays a crucial role in influencing the AUD by adjusting interest rates to maintain stable inflation. High interest rates compared to other central banks support the AUD, while quantitative easing and tightening can impact credit conditions. The health of the Chinese economy directly affects the AUD, with positive or negative surprises in Chinese growth data having a significant impact. The price of iron ore and the trade balance also play a crucial role in determining the value of the Australian Dollar.
The drop in AUD/USD to 0.6950 was influenced by a combination of factors, including a USD recovery, strong Australian PMIs, and the hawkish views of the RBA. The ongoing narrative of monetary policy divergence between the Fed and the RBA continues to drive the pair’s movement, with technical analysis indicating a positive outlook for the AUD/USD pair. The various factors influencing the Australian Dollar highlight the complex nature of currency movements and the importance of staying informed about global economic trends.