Wednesday’s inflation report has dampened expectations for a rate hike by the Reserve Bank of Australia (RBA) at its policy meeting. Economists have cautioned that further interest rate increases could threaten Australia’s economic recovery.
As a result, markets are now pricing in roughly a 50% chance of an RBA rate cut in November, a move anticipated earlier than the previously expected date of April next year. These factors are putting downward pressure on the Australian Dollar.
The Australian Dollar was languishing around 0.6540 on Thursday (1/08/2024), and the charts are painting a bleak picture! The AUD/USD pair is trapped in a relentless descending channel, hammering home a bearish sentiment that can’t be ignored.
The 14-day Relative Strength Index (RSI) is scraping the bottom, hovering dangerously close to the oversold 30 level—an ominous sign that a rebound might be just around the corner, but don’t hold your breath!
Support for the AUD/USD pair is hanging by a thread at the lower edge of the descending channel, around 0.6500. If it breaks below this critical level, brace yourself for a nosedive toward the throwback support at 0.6470—a level that could spell disaster for the pair.
On the flip side, resistance looms large at 0.6555, right at the upper boundary of this punishing channel. Push through this barrier, and the next obstacles are no walk in the park: the “throwback support turned resistance” at 0.6575 and the nine-day Exponential Moving Average (EMA) at 0.6581.
If the AUD/USD pair can defy the odds and break above this resistance, we could be looking at a dramatic surge towards a six-month high of 0.6798. Buckle up—this ride is far from over.
China’s Caixin Manufacturing Purchasing Managers Index (PMI) just crashed to 49.8 for July, slamming into the wall of disappointment.
The dismal number falls far short of the anticipated 51.5 and even undercuts the previous reading of 51.8. Given the tight economic ties between China and Australia, this grim update could send shockwaves through the Australian market.
But don’t get too carried away—there’s a silver lining for the Aussie Dollar. Why? Because the US Dollar is floundering after the Federal Reserve’s decision to keep rates stuck in the 5.25%-5.50% range at their July meeting.
Traders are now anxiously awaiting more clues from US economic data, including the ISM Manufacturing PMI and weekly Initial Jobless Claims, set to drop later today.
All eyes are on these figures to steer the market’s next move, as the AUD/USD pair struggles to navigate this tumultuous sea of economic data.
