AUD/USD Price Analysis: Corrects sharply to near 0.6450 as attention turns to Jackson Hole

• AUD/USD falls sharply as US dollar recovers ahead of Jackson Hole.
• Rising deflation risks in China are weighing on the Australian dollar.
• The AUD/USD pair has been sideways in a 50 point range for the past week.

The pair AUD/USD faced selling pressure after failing to recapture the psychological resistance of 0.6500 on Thursday. The pair has fallen to near 0.6450 as risk sensitive currencies have come under pressure ahead of the Jackson Hole Symposium.

The Dollar Index (DXY) bounces strongly after building a base around 103.30 as investors are cautious on comments from Federal Reserve (Fed) Chairman Jerome Powell. Investors disagree on whether Jerome Powell will emphasize keeping interest rates stable for longer or whether he will raise interest rates further.

Meanwhile, the Australian dollar is under pressure as market participants expect the Reserve Bank of Australia (RBA) to keep interest rate policy unchanged in September. In addition, rising deflation risks in China are weighing on the Australian dollar, which is an indirect indicator of China’s economic growth.

The AUD/USD pair has been sideways in a 50 point range for the past week. Overall, the pair is forming a bearish pennant chart pattern on the hourly scale. The consolidation part of the aforementioned chart pattern signifies the distribution of inventory from institutional investors to market participants. A break of it will result in the continuation of the downtrend.

The pair fails to hold above the 200-period EMA, indicating that investors are using the pullback move as a selling opportunity.

Also, the RSI (14) falls below 40.00, indicating that bearish momentum has been activated.

Looking ahead, a break below the Aug 22 low at 0.6403 will expose the pair to the August low at 0.6364, followed by round level support at 0.6300.

In an alternative scenario, a recovery move above the intraday high at 0.6490 will send the asset towards the 9th August high at 0.6571. A break of this last level would expose the asset to the August 10 high at 0.6616.

AUD/USD hourly chart