Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6420.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6400 and a take-profit at 0.6500.
- Add a stop-loss at 0.6300.
The AUD/USD exchange rate slipped to the lowest level since November 2022 as the US dollar rally gained steam. It also plunged after the Reserve Bank of Australia’s (RBA) Philip Lowe delivered his final interest rate decision.
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RBA decision and strong US dollar
The biggest economic event of this week was the interest rate decision by Australia’s central bank. As was widely expected, the bank decided to leave rates unchanged at 4.10%. It also committed to raise rates again if inflation remains stubbornly high in the coming months.
The decision came at a crucial period for the Australian economy. Recent economic numbers showed that the economy was slowing, with wage growth and manufacturing output falling.
Data published before the meeting showed that the current account dropped to $7.7 billion in Q2 from the previous $12 billion. The services PMI came in at 47.8, signaling that the sector is also contracting.
Data published on Wednesday revealed that Australia’s economy expanded by 1.7% in Q2 after it grew by 2.3% in the previous quarter.
China, Australia’s biggest trading partner, is also struggling as its exports, imports, retail sales, and factory output retreats.
The AUD/USD price also retreated as the greenback rally continued after the US markets reopened. The dollar index, which tracks the currency against a basket of currencies, soared to a high of $104.50, the highest level in more than five months.
The dollar is doing well as demand for the currency remains at an elevated level globally. Also, it has risen because of the relative strength of the US economy compared to the rest of the world.
The most recent data showed that the US economy expanded by 2.1% in Q2 and the Atlanta Fed sees it growing by 6% in the third quarter. The US will publish the latest services PMI numbers.
AUD/USD technical analysis
The AUD/USD exchange rate continued its sell-off after the RBA decision. It retested the important support at 0.6365, the lowest level on August 17th. The pair has moved below the 25-period and 50-period moving averages.
The Relative Strength Index (RSI) index is approaching the oversold level of 30 while the MACD has moved below the neutral point. Therefore, the outlook for the pair is bearish, with the next level to watch being at 0.6300.
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