AUD/USD Analysis: Recent Decline and Key Factors to Watch

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ForexInflux
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On Tuesday, July 16th, the AUD/USD pair experienced a 0.4% decline, closing at 0.6733. During the trading session, it touched a low of 0.6712. This drop has left many Aussie bulls concerned about the currency’s near-term prospects.

Key Factors Influencing the Aussie Dollar

  1. Strengthening US Dollar:
    • The continued rebound of the US dollar put pressure on the AUD/USD pair.
  2. Weak Chinese Economic Data:
    • China’s second-quarter GDP data came in softer than expected, negatively impacting the Aussie due to Australia’s close economic ties with China.
  3. Commodity Price Declines:
    • Significant drops in copper, iron ore, and oil prices weighed heavily on the commodity-linked Australian dollar.
  4. Diverging Central Bank Expectations:
    • The differing rate outlooks between the Reserve Bank of Australia (RBA) and the US Federal Reserve are helping to limit the Aussie’s downside.

Technical Analysis

Daily Chart Outlook:

  • The AUD/USD pair continues to face resistance around the 0.68 level, leading to a noticeable correction due to profit-taking at higher levels.

Key Level to Watch:

  • Support: 0.67 area (previously the upper boundary of a consolidation range)
  • This level is crucial for maintaining the current uptrend.

Potential Scenarios:

  1. If 0.67 support holds:
    • The Aussie may have room for further upside in the coming sessions.
  2. If 0.67 support breaks:
    • The AUD/USD pair could fall back into its previous consolidation range.

Outlook for Traders

  1. Keep a close eye on the 0.67 support level, as it’s key to determining the pair’s short-term direction.
  2. Monitor upcoming economic data releases from both Australia and the US, as they could significantly impact the pair’s movements.
  3. Watch for any developments in US-China relations or changes in commodity prices, as these factors can have a strong influence on the Aussie dollar.
  4. Stay informed about any shifts in RBA or Fed policy expectations, as these continue to play a crucial role in the AUD/USD pair’s performance.

Remember, forex markets can be volatile and are influenced by a wide range of factors. Always use proper risk management techniques when trading, and stay informed about relevant economic news and data releases from both Australia and its major trading partners.