- China’s rate reduction disappointed markets concerned about an economic slowdown.
- The dollar held its strength after marking five consecutive weeks of gains.
- Federal Reserve Chair Jerome Powell is scheduled to speak on Friday.
Today’s AUD/USD forecast is bearish. The Australian dollar remained uncomfortably close to its recent nine-month lows. This is because China’s rate reduction disappointed markets concerned about an economic slowdown.
Meanwhile, the dollar remained strong after marking five consecutive weeks of gains. Moreover, investors eagerly awaited guidance from the Federal Reserve’s Jackson Hole symposium. They hope to gain insights into the eventual settling of interest rates after the current cycle of rate hikes.
Contrary to economists’ projections of 15 basis point cuts for one-year and five-year benchmark lending rates, China opted for a 10-basis point reduction in the one-year rate while keeping the five-year rate unchanged. The Aussie often mirrors the yuan’s movements due to strong trade ties with China. It faced increased vulnerability as the interest rate outlook propelled the dollar.
Furthermore, strategists at the Commonwealth Bank of Australia anticipated continued underperformance of the Australian dollar throughout the week. They expressed concerns about the Aussie dropping below $0.60 by year-end.
Additionally, the upcoming Jackson Hole symposium took center stage for the markets. Federal Reserve Chair Jerome Powell’s scheduled speech on Friday at the symposium could dictate the trajectory of US yields.
Over the week, ten-year yields surged by 14 basis points, reaching a 10-month peak of 4.328%, coming close to a 15-year high. Additionally, thirty-year yields experienced an increase of almost 11 basis points, reaching their highest point over a decade.
The central theme of this year’s annual gathering in Wyoming is “structural shifts in the global economy.”
AUD/USD key events today
The pair will likely experience thin trading as investors are not expecting critical reports from the US or Australia today.
AUD/USD technical forecast: Countdown to 0.6400 breach.
On the charts, AUD/USD has paused slightly below the 30-SMA. The bears are struggling to break below the 0.6400 support level. The bias on the 4-hour chart is bearish because the 30-SMA still sits above the price despite the pause.
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Moreover, the RSI trades below 50, indicating that bears have solid momentum. Therefore, it might only be a matter of time before the price breaches the support and retests the next support at 0.6350.
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