- The AUD/USD falls to the increase in geopolitical risks and the lack of new fundamental drivers in Australia.
- The US dollar wins after Israel’s attacks on Iran’s nuclear facilities, impacting the demand of the Australian dollar.
- The pair remains influenced by the monetary policy expectations of both the Bank of the Australian Reserve and the Federal Reserve.
The Australian dollar (AUD) is weakening against the US dollar (USD) on Friday, with the action of the price guided by a combination of factors.
The two main drivers of the recent movement have been the increase in geopolitical risks and expectations of interest rates, which will probably continue to influence short -term price movements.
At the time of writing, the AUD/USD is negotiated below 0.6500, with intradic losses of 0.60%.
The feeling of the market is still fragile after the climb of tensions in the Middle East. Last night reports indicate that Israel launched selective attacks on Iranian nuclear and military sites, killing several high -ranking officials.
This has led to an increase in the fears of a broader regional conflict. He has also supported the demand for safe refuge of the US dollar, limiting the appetite for risk and pressing the high beta currencies, such as the Australian dollar.
In the Data Front, the preliminary consumer’s feeling index of the University of Michigan for June showed an improvement in household trust.
However, both the consumer inflation expectations one year and five years old moved slightly down, reinforcing the IPC and PPI data of the US weakest than expected this week.
Looking ahead, attention focuses on China’s key data that will be published on Monday, including industrial production and retail sales of May, which could greatly influence the AUD/USD due to the strong commercial ties of Australia with China.
Technical Analysis of the AUD/USD: bassist bias below 0.6500
The AUD/USD is negotiated below 0.6500 on Friday, backing after stagnating around 0.6535.
The price remains confined within an ascending wedge pattern after failing to break the previous resistance of the wedge, with 0.6535 now acting as a key rising barrier.
The Fibonacci recoil level of 61.8% of the fall from September to April at 0.6549 adds more resistance just above.
The pattern reflects a fading of the bullish impulse and the risk of a break if the support levels are not maintained. The immediate support is found in the simple mobile average (SMA) of 20 days about 0.6473, while a stronger support is aligned with the 200 -day SMA and the Fibonacci level of 50% in 0.6428.
Aud/USD Daily Graph
A closure below this area would confirm a rupture of the wedge and exhibit downward objectives at 0.6338 and 0.6306.
On the positive side, a rupture above 0.6535 would change the approach to 0.6550 and the broader recovery objective at 0.6722. The relative force index (RSI) is about 54, indicating a possible change in the trend as the bullish impulse fades.
Faqs Australian dollar
One of the most important factors for the Australian dollar (Aud) is the level of interest rates set by the Australian Reserve Bank (RBA). Since Australia is a country rich in resources, another key factor is the price of its greatest export, iron mineral. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and commercial balance. The feeling of the market, that is, if investors are committed to more risky assets (Risk-on) or seek safe shelters (Risk-Off), it is also a factor, being the positive risk-on for the AUD.
The Australian Reserve Bank (RBA) influences the Australian dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of the interest rates of the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2% -3% by adjusting the interest rates or the low. Relatively high interest rates compared to other large central banks support the AU, and the opposite for the relatively low. The RBA can also use relaxation and quantitative hardening to influence credit conditions, being the first refusal for the AU and the second positive for the AUD.
China is Australia’s largest commercial partner, so the health of the Chinese economy greatly influences the value of the Australian dollar (Aud). When the Chinese economy goes well, it buys more raw materials, goods and services in Australia, which increases the demand of the AU and makes its value upload. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian dollar.
Iron mineral is the largest export in Australia, with 118,000 million dollars a year according to data from 2021, China being its main destination. The price of iron ore, therefore, can be a driver of the Australian dollar. Usually, if the price of iron ore rises, the Aud also does, since the aggregate demand of the currency increases. The opposite occurs when the price of low iron ore. The highest prices of the iron mineral also tend to lead to a greater probability of a positive commercial balance for Australia, which is also positive for the AUD.
The commercial balance, which is the difference between what a country earns with its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly requested exports, its currency will gain value exclusively for the excess demand created by foreign buyers who wish to acquire their exports to what you spend on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the commercial balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
