The Australian Dollar (AUD) faced downward pressure on Tuesday, influenced by comments from the National Development and Reform Commission (NDRC) of China. The state planner indicated that China’s economy is navigating a more complex internal and external landscape, disappointing traders with the lack of significant stimulus measures. Additionally, escalating geopolitical tensions in the Middle East have fostered a risk-off sentiment, further pressuring risk-sensitive assets like the AUD.
Despite these challenges, the downside for the AUD may be limited due to the hawkish stance of the Reserve Bank of Australia (RBA) as highlighted in the September Meeting Minutes. Traders are also awaiting speeches from US Federal Reserve officials later on Tuesday, looking for fresh insights ahead of the upcoming Federal Open Market Committee (FOMC) Minutes. Attention will then turn to the US Consumer Price Index (CPI) report for September, scheduled for release on Thursday.
According to the RBA’s September Meeting Minutes, board members discussed various scenarios for future interest rate adjustments. The Minutes noted, “Policy will need to remain restrictive until Board members are confident inflation is moving sustainably towards the target range.” RBA Deputy Governor Andrew Hauser emphasized the ongoing challenge of lowering inflation, stating that significant work remains to be done.
St. Louis Fed President Alberto Musalem supported additional interest rate cuts, suggesting that the performance of the economy will dictate the future path of monetary policy. Meanwhile, Minneapolis Fed President Neel Kashkari backed the recent 50 basis point rate cut, noting a shift in the balance of risks from high inflation to potential increases in unemployment. Market expectations have shifted significantly, with the CME FedWatch Tool indicating an 85% probability of a 25 basis point rate cut in November, up from just 31.1% the previous week.
From a technical perspective, the AUD/USD pair remains within the lower limit of an ascending trend channel, retaining a bullish bias as it stays above the key 100-day Exponential Moving Average (EMA). However, the potential for further consolidation or downside exists, as indicated by the 14-day Relative Strength Index (RSI) sitting just below the midline at 47.0.
The lower boundary of the trend channel near 0.6735 serves as an initial support level for the AUD/USD pair. A break below this level could lead to bearish momentum, dragging the pair toward the psychological level of 0.6700, with further support at 0.6622, the low recorded on September 11.
On the upside, the first resistance level is located at 0.6823, marking the high from August 29. Should the pair extend its gains, it could target 0.6942, the high from September 30. A decisive breakout above this level could attract enough buying interest to push the AUD/USD pair toward the upper boundary of the trend channel at 0.6980.
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