Daily Price Outlook
The AUD/USD currency pair managed to extend its gaining streak and remained well bid around 0.6420 marks. However the reason for its upward rally can be tied to the China rolled out new measures over the weekend to draw investors back into its battered stock markets, which, along with the better-than-expected domestic data, provided a modest lift to the Australian Dollar (AUD) on the first day of a new week. Apart from this, a positive tone around the equity markets drags the safe-haven US Dollar (USD) away from its highest level since early June touched on Friday and offers additional support to the AUD/USD pair.
China's Market Measures and Domestic Data Impact on AUD/USD Pair
Moreover, China introduced new measures over the weekend to attract investors back to its struggling stock markets. This, coupled with better-than-expected domestic data, gave a slight boost to the Australian Dollar (AUD) as the new week began. Notably, China's finance ministry announced a reduction in the stamp duty on stock trading from 0.1% to 0.05%, the first decrease since 2008. Apart from this, the Australian Bureau of Statistics (ABS) revealed a 0.5% rise in Retail Sales for July, surpassing the anticipated 0.3% increase and recovering from the previous month's 0.8% decline.
Consequently, this development holds the potential to positively influence the AUD/USD pair. China's market measures and the robust domestic data may enhance investor confidence in the Australian Dollar, potentially contributing to its strength against the US Dollar.
USD Trends, Fed Expectations, and the Impact on AUD/USD Pair
Moreover, the positive sentiment in the stock markets is pulling the safe-haven US Dollar (USD) down from its recent peak in early June, providing added support to the AUD/USD pair. However, the USD's decline is modest due to growing expectations of the Federal Reserve (Fed) tightening its policies.
Investors are anticipating another 25 basis points rate hike before the year ends, a view reinforced by Fed Chair Jerome Powell's hawkish comments at the Jackson Hole Symposium. Powell's statement indicated that the Fed might need to further raise rates to manage persistent inflation concerns.
Consequently, this situation could impact the AUD/USD pair. The upbeat equity market mood and the corrective USD dip might enhance the Australian Dollar's attractiveness, potentially causing it to gain strength against the US Dollar. Nevertheless, the USD's potential for more rate hikes could limit the AUD's gains.
AUD/USD - Technical analysis
The AUD/USD pair is demonstrating resilience around the 0.6400 juncture, initiating the session with an ascendant bias. It is attempting to distance itself from this benchmark, gearing up for a potential bullish surge with a tentative target in the vicinity of 0.6545.
Our analysis postulates a bullish orientation for today, corroborated by auspicious indications from the stochastic oscillator. Transcending the 0.6450 marker could further facilitate this upward trajectory. Conversely, any decline below the 0.6400 level might disrupt this bullish thesis, potentially reverting the pair to its prevailing bearish trend. For the day, we forecast a trading range delineated by a support level at 0.6380 and a resistance point at 0.6480.
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