The Australian Dollar (AUD) faced continued downward pressure on Tuesday, likely driven by prevailing risk aversion sentiment in the market. However, a slight uptick was observed in the AUD/USD pair following the release of the Westpac Consumer Confidence data during the early Asian trading hours. The index recorded a modest decline of 0.3% month-over-month in May, marking the third consecutive month of decrease but at a slower pace compared to previous months.
Support for the Australian Dollar could potentially emerge from China’s announcement of a comprehensive stimulus package aimed at bolstering its struggling property market. Measures include the relaxation of mortgage rules and directives to local governments to absorb unsold homes, fostering positive sentiment in Australian markets given the close trade ties between the two nations.
Meanwhile, the US Dollar (USD) maintained stability amidst the absence of significant economic data releases from the United States. The Greenback found support from higher US Treasury yields, with the Federal Reserve (Fed) expressing caution regarding inflation and the possibility of rate adjustments in 2024.
In recent developments, minutes from the Reserve Bank of Australia‘s (RBA) May 2024 meeting indicated deliberation over potential rate hikes, ultimately favoring a steady policy stance. The ASX 200 experienced fluctuations, influenced by mixed performance on Wall Street, with gains in the tech sector offset by declines in other industries.
Federal Reserve Bank of Cleveland President Loretta Mester expressed reservations about three rate cuts in 2024, citing upward inflation risks and advocating for further data assessment. The probability of a 25 basis-point rate cut by September, as indicated by the CME FedWatch Tool, saw a marginal increase.
Trade tensions between the US and China persisted, exemplified by China’s prohibition on General Atomics Aeronautical Systems from engaging in import-export activities with China. Any economic shifts in China could impact the Australian market significantly due to their close trade relationship.
Technical analysis suggests the AUD/USD pair may test the psychological level of 0.6700, with an ascending triangle formation observed on the daily chart and a bullish sentiment indicated by the 14-day Relative Strength Index (RSI). Upside potential could lead to exploration of the four-month peak around 0.6714, while downside support lies near the nine-day Exponential Moving Average (EMA) at 0.6651. A breakout above or below these levels could signal further directional movements for the pair.
