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09/10/24
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AUD/USD Faces Downward Pressure Amidst U.S. Dollar Strength and China Stimulus Woes
The AUD/USD currency pair is experiencing downward momentum for the fifth consecutive day, influenced by a moderate strengthening of the U.S. dollar. The Australian dollar is facing additional pressure due to market disappointment over recent updates regarding China’s economic stimulus measures. Traders are also anticipating insights from the Federal Open Market Committee (FOMC) minutes, which could provide direction ahead of key U.S. inflation data.
After a brief uptick to around 0.6760 earlier in the day, the AUD/USD has fallen back into negative territory, trading between 0.6725 and 0.6720 during the initial half of the European session. This decline brings prices closer to a three-week low reached the previous day, with bearish traders eyeing the 50-day Simple Moving Average as a potential breakout point.
The Australian dollar’s weakness is primarily attributed to disappointing news from China. The National Development and Reform Commission highlighted ongoing complexities within both internal and external economic landscapes but failed to announce significant new stimulus initiatives. This lack of support has overshadowed the recently released minutes from the Reserve Bank of Australia’s September meeting, which could have provided a more optimistic outlook.
Amidst this backdrop, investors are reassessing their expectations regarding the Federal Reserve’s monetary policy. There has been a reduction in bets for extensive policy easing and major interest rate cuts, particularly in November, as the U.S. labor market shows continued resilience. Consequently, the yield on the benchmark 10-year U.S. government bond remains above the 4% mark, while the dollar index is hovering near a seven-week high.
Given the current market environment, the AUD/USD pair seems poised for further retracement from its recent highs, recorded last month around the 0.6940-0.6945 area. Market participants are likely to adopt a cautious stance and await clearer signals from the Fed’s rate trajectory. The FOMC meeting minutes and subsequent U.S. Consumer Price Index and Producer Price Index reports will be key focal points in the coming days for traders.
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