The AUD/USD pair experienced a drop, adjusting to 0.6950 due to a USD recovery. This movement was influenced by a narrative of monetary policy divergence between the Federal Reserve and the Reserve Bank of Australia. Despite strong Australian PMIs limiting the pair’s downside, the pair retraced some gains after a 2% rally in the previous sessions. The hawkish views of the RBA have been supporting the Aussie against its peers, but the USD staged a recovery on Thursday, which may have put some pressure on the pair. The market sentiment is divided, with markets anticipating a minimal 25 basis points of easing for 2024, while the RBA remains hawkish due to high inflation. In contrast, preliminary August PMIs from Australia show a positive outlook for the economy, with improvements in manufacturing, services, and composite indices. Despite promising Australian data, the path of the pair will continue to be guided by incoming data from both countries.
Technical analysis suggests that the AUD/USD pair has been on an upward trajectory, with increased volume reinforcing a positive outlook. The RSI and MACD indicators align with a slightly bullish sentiment, with the pair consolidating above the 0.6700 support level. The immediate critical resistance lies around the recent high of 0.6760-0.6800. Factors such as interest rates set by the RBA, the price of Iron Ore, the health of the Chinese economy, inflation in Australia, growth rate, and Trade Balance all play significant roles in influencing the value of the Australian Dollar. Market sentiment also affects the AUD, as investors’ risk appetite can either boost or dampen the currency. The RBA’s monetary policy decisions, including adjustments in interest rates and quantitative easing, have a direct impact on the Aussie’s value in the Forex market.
China’s economic health is crucial for the Australian Dollar, as China is Australia’s largest trading partner. Positive or negative surprises in Chinese growth data can directly affect the AUD and its pairs. The price of Iron Ore, Australia’s largest export, is another key driver of the Australian Dollar. A rise in Iron Ore prices usually leads to an increase in the AUD’s value, as demand for the currency spikes. Conversely, a decrease in Iron Ore prices can drag down the AUD. Higher Iron Ore prices also tend to result in a positive Trade Balance for Australia, further strengthening the AUD. The Trade Balance, determined by the difference between exports and imports, can either boost or weaken the Aussie based on whether it is in surplus or deficit.
The movement of the AUD/USD pair is heavily influenced by a variety of economic factors, market sentiment, and technical indicators. While the RBA’s hawkish stance and positive Australian economic data support the Australian Dollar, factors like the USD recovery, Chinese economy, Iron Ore prices, and Trade Balance also impact the pair’s movement. Traders and investors need to closely monitor these variables to make informed decisions in trading the AUD/USD pair.