AUD/USD Price Analysis – Sep 06, 2023

Daily Price Outlook

The AUD/USD currency pair has found support around the mid-0.6300s for the second day in a row and is recovering slightly from its lowest point since November 2022, which it reached this Wednesday. However, it's struggling to break above the 0.6400 level during the early European session. The pair strives to rebound from its year-to-date low, but its upward momentum remains limited. However, the slightly improved Australian GDP provides some relief as demand for the US dollar remains subdued. However, concerns loom over China's economic outlook, restraining any substantial gains, with traders awaiting the US ISM Services PMI for clearer market direction.

USD Pauses, Australian GDP Boosts AUD/USD

However, the US Dollar is taking a breather after its recent climb to a six-month high. This pause, combined with a positive Australian GDP report, is prompting some short-covering in the AUD/USD currency pair. It is worth noting that the Australian Bureau of Statistics revealed that the economy grew by 0.4% from April to June, slightly exceeding the expected 0.3% and surpassing the previous quarter's 0.2% growth. On an annual basis, it came in at 2.1%, just below the 2.3% seen in the first quarter. This better-than-expected economic performance in Australia is contributing to the Aussie dollar's recovery against the US dollar.

AUD/USD Faces Challenges Amid China Worries and US-China Trade Tensions

Meanwhile, the AUD/USD pair is struggling to gain bullish momentum due to concerns about China's worsening economic situation. Furthermore, the ongoing trade tensions between the US and China are capping the gains of the Australian Dollar, which is often seen as a proxy for China's economic performance. In the latest news, US Secretary of Commerce Gina Raimondo mentioned that she doesn't anticipate any changes to the tariffs imposed on China by the previous US administration until the current review by the US Treasury is completed.

Therefore, these factors, combined with the expectation that the Reserve Bank of Australia (RBA) will not raise interest rates further, are weighing on the Australian Dollar.

RBA Holds Steady, Fed Rate Expectations Favor USD

Furthermore, the Australian central bank has maintained its Official Cash Rate at 4.10% for the third consecutive month, signaling a pause in its policy tightening. In contrast, the market anticipates a 25 basis point rate hike by the Federal Reserve (Fed) in 2023, bolstering US Treasury bond yields and the US dollar. Moving on, traders await the US ISM Services PMI release in the early North American session and monitor US bond yields, which will influence the US dollar and create short-term trading prospects.

AUD/USD - Technical Analysis

The AUD/USD pair concluded its trading below the 0.6400 mark yesterday, reinforcing the anticipated bearish trajectory for both intraday and short-term periods, with a clear path towards our target of 0.6300.

The enduring influence of the bearish flag pattern underscores the projected decline, complemented by the downward pressure exerted by the EMA50. It's pivotal to highlight that any surge beyond 0.6400 could disrupt this bearish outlook, prompting the price to initiate a recovery phase.

For today's trading, we project a range bracketed by a 0.6310 support level and a 0.6410 resistance threshold, with prevailing sentiment tilting bearish.