AUD/USD Analysis: under pressure ahead of RBA

AUD/USD Current Price: 0.6961

• The Reserve Bank of Australia is expected to cut rates to a new record low of 1.0%.
• Chinese soft data and dollar’s demand triggered an AUD/USD decline.

The AUD/USD pair has peaked at 0.7034 at the weekly opening amid the generalized positive sentiment that dominated the financial markets but ended up falling to the current 0.6960 price zone, as Aussie’s strength was offset by poor Chinese data released over the weekend, while the greenback appreciated on positive US macroeconomic figures. Early Monday, Australia released the TD Securities Inflation monthly report, which resulted at 0.0% in June, while China released the Caixin Manufacturing PMI which fell more than anticipated, down to 49.4 from 50.2 in May, also below the 50.0 expected.

The Reserve Bank of Australia will have a monetary policy meeting early Tuesday, and the market is anticipating another rate cut coming, to a record low of 1.0%, most of it, already priced in. Nevertheless, the decision to take the cash rate lower would likely hit the Aussie, alongside a dovish outlook from Lowe & Co. The fact that the US Federal Reserve has also shifted to a cut policy offsets RBA’s efforts, and shouldn’t surprise if Australian policymakers have more cuts in their sleeves.

The AUD/USD pair is trading at around the 38.2% retracement of the latest bullish run, measures between 0.6831 and the mentioned high. The short-term picture is bearish, as, in the 4 hours chart, is currently developing below its 20 SMA, which gains bearish strength in the 0.6990 area, and as the 100 and 200 SMA lack directional strength below the current level. Technical indicators have pared their declines but remain near their daily lows, rather reflecting the decreased volume at the end of the day than indicating downward exhaustion.

Support levels: 0.6930 0.6895 0.6860

Resistance levels: 0.6990 0.7035 0.7070

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