Further Pain in Store for the Aussie Dollar?

AUDUSD PRICE, CHARTS AND ANALYSIS:

Most Read: The Reserve Bank of Australia: A Trader’s Guide

AUD FUNDAMENTAL BACKDROP, CHINA CONCERNS GROW

The Australian Dollar is attempting to snap a three-day losing streak against the Greenback. Reserve Bank of Australia (RBA) Governor Lowe provided the Aussie Dollar with some ammunition following comments which lent on the hawkish side as he maintained the RBA is committed to the inflation fight, not ruling out further rate hikes.

Governor Lowe stated the Central Banks core prediction is for CPI inflation to be approximately 3¼ percent by the end of next year, and to be back within the 2-3% goal range by late 2025. The comments have seen AUDUSD hold the line just above the 0.6500 handle heading into the European open.

The Chinese recovery continues to negatively impact the Australian Dollar as evidenced by this week’s poor import and export numbers coinciding with renewed weakness in the Australian Dollar. There have been some positive developments however as China have lifted tariffs imposed on Australian Barley with the Asia-Pacific nation looking at the possibility of restriction being lifted in other sectors as well. The bigger concern in my view, however, remains the uneven recovery by China which continues to hamper the growth story in Australia and could have an impact on the possibility of further rate hikes from the RBA.

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The diverging paths and economic conditions between the US and Australia doesn’t bode well for a sustained AUD recovery while the technical picture is flashing signs that further downside may be ahead.

Looking at the day ahead, we do have some US data in the form of PPI and the preliminary Michigan Consumer Sentiment data which will be released and could keep the US Dollar supported. Overall, even if US data fails to come in positive today any gains by the Australian Dollar is likely to face selling pressure with the technical breakdown likely to provide a better idea of key areas to focus on.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

The technical outlook on AUDUSD and price has finally broken below the symmetrical triangle pattern with a retest and rejection yesterday resulting in a shooting star candle close. Comments from Governor Lowe have lent the Aussie Dollar some support this morning, but the selling pressure may keep gains capped around the 0.6550 and 0.6600 levels from an intraday perspective.

If we are to see a deeper pullback to the upside there remains a key confluence area around the 0.6660-0.6690 range. I for one do not see a break above that key are anytime soon without a significant change in the macro picture.

Key Levels to Keep an Eye On:

Support Levels

Resistance Levels

• 0.6550
• 0.6600
• 0.6680 (100-day MA)

AUD/USD Daily Chart – August 11, 2023

Source: TradingView

IG CLIENT SENTIMENT

Taking a quick look at the IG Client Sentiment Data which shows retail traders are 82% net-long on AUD/USD with the ratio of traders long to short at 4.54 to 1.

For a more in-depth look at GBP/USD sentiment and the changes in long and short positioning, download the free guide below.

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda