- Escalating concerns over China’s property troubles highlights the need for stimulus.
- The dollar gained strength as Treasury yields rose.
- Futures suggest a 70% likelihood that the Federal Reserve has completed its rate hikes.
Today’s AUD/USD outlook is bearish. On Monday, the Australian dollar made new lows before recovering due to escalating concerns over China’s property troubles. Concurrently, the dollar gained strength as Treasury yields rose.
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Notably, the challenges faced by China’s primary private property developer, Country Garden, have the potential to impact homebuyers and financial institutions negatively. The company’s stocks plummeted by 18% to reach an all-time low on Monday following the suspension of its onshore bonds.
This setback dealt another blow to policymakers striving to bolster confidence in a faltering economy. Moreover, recent news indicated that two Chinese-listed companies had not received payments on maturing investment products from Zhongrong International Trust Co.
Meanwhile, data this week will include US retail sales figures, projected to reflect a 0.4% increase in spending. However, the risk factors lean towards the higher side, partially attributed to Amazon’s Prime Day.
Such an outcome could challenge the prevailing anticipation of stable interest rates. Currently, futures suggest a 70% likelihood that the Federal Reserve has completed its rate hikes. Moreover, the market has priced in over 120 basis points of cuts for next year, starting around March.
Meanwhile, the Fed’s most recent meeting minutes will come out on Wednesday. They might reveal that members aimed to maintain flexibility concerning further rate hikes.
Despite the economy’s resilience and significant government borrowing needs, the 10-year Treasury yields remained at 4.15%. This followed a 12 basis point increase the previous week. This rise in yields bolstered the dollar against other major currencies.
AUD/USD key events today
It will likely be a quiet day for AUD/USD as no major economic releases are coming from the US or Australia.
AUD/USD technical outlook: Downtrend persists, breaching the essential 0.6500 level.
AUD/USD continues to descend on the charts, with the latest move being a break below the 0.6500 key level. However, the price stays closer to the 30-SMA, indicating less enthusiasm to lower prices.
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At the same time, the RSI has made a bullish divergence with the price, further indicating weakness in the downtrend. Consequently, we might see a deep pullback, breaking above the 30-SMA or a trend reversal.
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