- China’s upward guidance of the yuan contributed to a weaker dollar.
- The Central Bank of China set the midpoint of the yuan’s trading band at its strongest level since Aug. 7.
- Investors have even begun pricing in rate cuts as early as March.
In the realm of AUD/USD price analysis, Tuesday witnessed a commendable surge in the Australian dollar, driven by the announcement of China’s currency adjustment. This noteworthy event injected a distinctly bullish sentiment into the ongoing market evaluation of AUD/USD.
At the same time, China’s upward guidance of the yuan contributed to a weaker dollar ahead of the Federal Reserve’s minutes. However, analysts caution that the downward momentum of the dollar may be limited.
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The Central Bank of China set the midpoint of the yuan’s trading band at its strongest level since Aug. 7. As a result, the yuan reached an almost four-month high of 7.1301 against the dollar. At the same time, the Australian dollar climbed 0.4%, reaching a three-month high. National Australia Bank strategist Rodrigo Catril in Sydney noted that China’s strong currency fixing and a Bloomberg News report on support for the property sector boosted market sentiment.
Catril said, “It’s encouraging the market to think: ‘OK, cool, we’ve seen the worst CNY weakness.’ Moreover, they’re telling us they want dollar/CNH lower.” According to Bloomberg News, Chinese regulators are compiling a list of 50 developers eligible for funding.
Meanwhile, minutes from Australia’s November policy meeting revealed the central bank’s concern that inflation expectations could become entrenched if it did not raise interest rates.
Elsewhere, investor attention will focus on the Federal Reserve’s last meeting minutes to assess the direction of interest rates. Traders have nearly fully priced in the likelihood of the Fed maintaining unchanged interest rates in December. Furthermore, some have even begun pricing in rate cuts as early as March.
AUD/USD key events today
- Fed meeting minutes
- The existing home sales report from the US
AUD/USD technical price analysis: Bearish divergence
Aussie is ascending toward the 0.6600 resistance level. Bulls made progress when the price broke above the strong 0.6525 resistance level. However, the RSI shows weaker bullish momentum even as the price climbs. There is a bearish divergence that indicates exhaustion in the bullish move.
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Therefore, bulls might need to pause and retest the 0.6525 key level before the uptrend continues. However, the uptrend will only continue if the price holds above the 30-SMA and the RSI stays above 50.
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Saqib Iqbal
