AUD/USD Outlook: Bearish amid Ongoing Demonstrations in China

• Aussie fell on Monday as the safe-haven dollar rose amid unrest in China.
• The stringent COVID-19 restrictions have fueled demonstrations in China.
• The PBOC will lower the reserve requirement ratio to boost growth.

Today’s AUD/USD outlook is bearish. The risk-sensitive pair fell on Monday as investors scrambled for safety in the dollar amid unrest in China. On Sunday night, protests against China’s strict COVID restrictions erupted for the third day and extended to many locations, sparking clashes involving hundreds of protesters and police.

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Since President Xi Jinping took office a decade ago, there has never been a wave of civil disobedience in mainland China. Still, as the pandemic has been going on for nearly three years, frustration over his famous zero-COVID policy has grown. The COVID policies are also having a significant negative impact on the second-largest economy in the world.

“We’re looking at the government response to what’s happening … the government response is so unpredictable, and of course, that just means de-risking,” said Chris Weston, head of research at Pepperstone.

The severe COVID limitations have hurt China’s economy, and the government has taken several steps to boost growth. For instance, the reserve requirement ratio (RRR) for banks will be reduced by 25 basis points (bps) starting on December 5, according to a statement released on Friday by the People’s Bank of China (PBOC).

The civil unrest in China has ended the recent dollar decline. This decline was driven by the rising optimism of a Fed pivot to smaller rate hikes. Monday, however, saw a surge in the dollar, pushing AUD/USD lower.

AUD/USD key events today

There won’t be any significant news releases from the United States or Australia today, so investors will keep an eye on the developments in China.

AUD/USD technical outlook: Bearish momentum leading below 30-SMA

Looking at the 4-hour chart, we see the price trading slightly below the 30-SMA and the RSI slightly below 50. Bears have shown their strength by pushing the price below the 30-SMA. This move comes after the price failed to go above the 0.6778 resistance.

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Bears took over, and they were able to puncture the 30-SMA. If they can keep up this momentum, the price will likely hit the 0.6600 support. There is also the possibility that bulls return after the puncture. If they do, the price will retest the resistance at 0.6778.

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