Australian dollar ends week with losses on falling commodity prices and risk aversion

The AUD saw a slight improvement on Friday but was one of the worst performing currencies among the G10 currencies.
Falling commodity prices and China’s economic woes weighed on the Australian dollar.
The US dollar remains stable after mixed PCE data.

The Australian Dollar (AUD) rebounded slightly against the USD in Friday’s session as AUD/USD rebounded to 0.65515 on corrective action following massive selling in previous sessions. Continued weakness in the Chinese economy coupled with falling iron ore prices remain significant contributors to the AUD’s animated performance.

Despite the apparent vulnerability of the Australian economy, the Reserve Bank of Australia (RBA) is delaying interest rate cuts due to persistently high inflation. This stance could potentially limit further depreciation of the AUD. Based on current forecasts, the RBA could be one of the last G10 central banks to implement interest rate cuts, which could extend AUD gains.

Daily Market Update: The Australian sees modest recovery amid ongoing economic tensions in China and Australia

The AUD/USD pair remains firmly rooted in a risk-off bias, dominated by concerns about the Chinese economy and the AUD’s status as a “high risk” currency in the G10.
Earlier this week, the People’s Bank of China (PBoC) decided to cut interest rates, raising concerns about the health of the world’s second-largest economy and Australia’s main trading partner.
Additionally, industrial metals prices remained under pressure due to ongoing concerns about feeble demand from China.
The Reserve Bank of Australia (RBA) remains hawkish, with markets betting on a potential rate hike in Q4, reflecting a near 50 per cent chance of a rate hike in September or November.

AUD/USD Technical Analysis: Bearish outlook remains with the pair trading below major moving averages

AUD/USD’s move below the 20, 100 and 200-day elementary moving averages (SMAs) remains a grave concern, suggesting that the downtrend may continue and that the declines seen in July were not entirely corrective in nature.

Key support levels are located at 0.6540, 0.6530 and 0.6500, while resistance levels lie at 0.6600 (i.e. 200-day SMA), 0.6610 and 0.6630.