Australian dollar falls amid US dollar strength

The pair fell significantly to 0.6764 at the start of the week, driven mainly by a strengthening of the US dollar rather than an inherent weakness in the Australian dollar itself. This change in the dynamics of the currency pair is mainly attributed to the latest core PCE inflation data released last Friday, which tempered market expectations regarding the pace of future interest rate adjustments by the Federal Reserve.

The market is now in a consolidation phase awaiting the vital US employment data for August, due out this Friday. This upcoming report is critical as it could influence the Federal Reserve's decisions in the short term.

In August, Australia's manufacturing sector continued to face challenges, with high loan servicing costs and subdued demand from both businesses and consumers acting as significant headwinds.

Investors are also looking forward to further insights from Reserve Bank of Australia (RBA) Governor Michelle Bullock. She recently indicated that it is premature to consider easing monetary policy given the persistence of elevated inflation despite some signs of cooling. The minutes of the RBA’s latest meeting have echoed this sentiment, suggesting that the central bank could maintain a restrictive monetary policy stance for an extended period.

Technical analysis of the AUD/USD pair

The AUD/USD pair is surfing the first wave of decline towards the level of 0.6743. There is an expectation that this target will be reached soon, followed by a corrective move towards 0.6783 (test from below). This would outline the upper boundaries of a consolidation range. If the pair breaks down from this range, a further decline towards 0.6690 is anticipated. A break below this level could signal the start of a new downtrend towards 0.6640, which could extend up to 0.6555. The MACD indicator supports this bearish outlook with its high signal line directed downwards.

On the H1 chart, the pair is forming a downward wave structure targeting 0.6743. After reaching this level, a rebound to 0.6783 may occur, which would set the stage for the next downward phase. This scenario is corroborated by the Stochastic oscillator, whose signal line is preparing to fall from below 80 to around 20, indicating a potential for continued declines.

By RoboForex Analysis Department

Disclaimer
The forecasts contained in this document are based on the author's personal opinion. This analysis cannot be considered as trading advice. RoboForex does not assume any responsibility for trading results based on trading recommendations and reviews contained herein.