The Australian Dollar (AUD) has begun to retrace its recent losses against the US Dollar (USD) on Thursday, supported by contrasting monetary policy outlooks between the Reserve Bank of Australia (RBA) and the Federal Reserve. The AUD/USD pair finds additional backing from China’s announcement of a significant stimulus package, aimed at bolstering its economy, which is crucial for Australia’s trade.
The RBA recently held its Official Cash Rate steady at 4.35%, with Governor Michele Bullock confirming that rates would remain unchanged for now. In contrast, the Federal Open Market Committee (FOMC) cut the federal funds rate to a range of 4.75% to 5.0%, marking the Fed’s first rate cut in over four years. Market expectations suggest a 50% chance of further reductions by the Fed by year-end.
Traders are awaiting the release of the final US Gross Domestic Product (GDP) Annualized figures for Q2 later today, along with Personal Consumption Expenditures (PCE) data on Friday, which could influence the USD’s strength.
China plans to inject over CNY 1 trillion into its largest state banks, a move that may ease financial pressures and provide broader support to the Australian economy. However, concerns remain regarding the stress in China’s financial sector and its impact on Australian borrowers, with the Commonwealth Bank forecasting potential downward revisions to RBA’s consumption outlook.
Technical analysis indicates that the AUD/USD pair is currently trading near 0.6830, having breached the lower boundary of its ascending channel. The 14-day Relative Strength Index (RSI) remains above 50, suggesting persistent bullish sentiment. Key resistance is at 0.6860, while support is found at the nine-day Exponential Moving Average (EMA) at 0.6809 and the psychological level of 0.6700. A break below 0.6700 could lead to further declines toward 0.6622.
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