- The Aud/USD hesitates at 0.6500 while the markets discount a third consecutive rate cut of the RBA.
- The rejection of the resistance at 0.6600 and the fading of Momentum highlights a possible bearish reversal of the trend.
- The key support in 0.6435–0.6428 is under threat; The risks of rupture increase before the decision of the RBA.
The AUD/USD extended its losses on Monday, falling more than 0.87% in the day to negotiate about 0.6487 at the time of writing.
With the markets currently discounting a probable rate cut of the Bank of the Australian Reserve (RBA) on Tuesday, the feeling of risk has deteriorated before the deadline of US tariffs.
According to a Reuters survey published on Friday, a strong majority of 31 of 37 economists expects the Central Bank to implement a third rate of 25 basic points on Tuesday. This would carry the official cash to 3.60%.
This anticipated movement reflects the response of the RBA to the moderation of inflation and a domestic economy in deceleration. Meanwhile, the Federal Reserve (FED) has maintained interest rates within the range of 4.25% to 4.50%, providing some support to the US dollar.
The AUD/USD is showing signs of a bearish reversal after being rejected at the key psychological level of 0.6600, which is above the fibonacci setback of 61.8% of the fall from January to April at 0.6550.
The torque is now testing a critical support zone defined by the 50 -day exponential mobile average (EMA) in 0.6472, the 200 -day EMA in 0.6435 and the fibonacci setback of 50% in 0.6428. A decisive closure below these levels, particularly below the 200 -day EMA and the round number 0.6400.
A downward movement would mark a rupture of the ascending trend line drawn from the minimum of April, undermining the broader upward structure.
At the same time, the momentum is fading, with the relative force index (RSI) falling to 47, indicating a neutral feeling but in deterioration. Greater downward pressure could arise if the RSI continues towards level 40, pointing out a growing bearish momentum.
Australian dollar – frequent questions
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.
