Can AUD/USD reverse its five-week decline?
The AUD/USD marked its fifth consecutive week of losses, beset by a constant barrage of negative news both from within Australia and abroad.
Declines amidst global and domestic pressures
The AUD/USD marked its fifth consecutive week of losses, beset by a constant barrage of negative news both from within Australia and abroad. These included concerns over the Chinese economy, rising US yields, and softer Australian wages and jobs data.
With a 4.75% drop in August and limited data on the Australian economic calendar for the week ahead, the prospects of an Australian dollar recovery now hinge on offshore events, which have begun on a disappointing note.
China's influence and disappointing rate cuts
Reports over the weekend about Chinese authorities discussing measures to stabilize the Chinese economy, including adjustments to real estate credit policies, raised expectations of a 15bp cut to both the 1-year and 5-year loan prime rates. However, the actual outcome fell short, as the short-term 1-year loan rate saw a 10bp cut to 3.45%, while the five-year rate remained unchanged at 4.20%. This led to investor disappointment, reflected in the AUD/USD dropping from .6410 to a low of .6394 before recovering to .6400.
Jackson Hole economic symposium
Later this week, the annual central banker's conference, the Jackson Hole Economic Symposium, will take place. Expectations are for speeches by Fed Chair Powell and ECB President Lagarde. While no new signals on monetary policy are anticipated due to data dependency, the possibility of a more hawkish tone from Fed Chair Powell due to strong US economic data remains a risk.
AUD/USD technical analysis
In the previous week's AUD/USD analysis, we reiterated our bearish stance, emphasizing that a sustained break below support at .6460/50ish could pave the way for a test of the downside support level at .6350.
The .6360/50 support level holds immense importance for the AUD/USD, stemming from the uptrend support from the Covid March 2020 low of .5509 and the .6170 low of October 2022. Experience shows that multi-week/month trend support levels seldom break on the first attempt. Hence, as long as the AUD/USD remains above the weekly uptrend support at .6360/50, a bounce is plausible. This could potentially drive the AUD/USD to test resistance at .6500c and potentially exceed it in a counter-trend rally.
However, it's crucial to note that if the .6350 support level gives way, there's limited downside support until .6200/.6170 (October 2022 low), and even further down to .6000c.
AUD/USD weekly chart
- TradingView: the figures stated are as of August 21, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.