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AUD/USD Current Price: 0.7042
- The contracting Chinese economy added to global headwinds and weighed on the aussie.
- The Reserve Bank of Australia is set to raise the cash rate for the first time in over a decade.
- AUD/USD trades near the critical 0.7000 threshold with a bearish bias.
The Australian Dollar was among the weakest greenback’s rivals on Monday, with AUD/USD trading in the 0.7030 price zone at the end of the American session. The American currency appreciated on the back of risk aversion, triggered by poor Chinese data released over the weekend, later fueled by persistent tensions in Europe.
According to official figures, the Chinese economy suffered a major setback in April, mostly due to the latest coronavirus outbreak in the country. The NBS Manufacturing PMI contracted to 475, while the Non-Manufacturing PMI plunged to 41.9. Australian data released at the beginning of the week was generally encouraging but fell short of boosting the local currency. The S&P Global Manufacturing PMI beat expectations by reaching 58.8 in April, while the official AIG index improved from 55.7 to 58.5 in the same month.
Gold prices plummeted despite a generalized dismal mood, adding pressure on the AUD. The bright metal traded as low as $1,854.37 a troy ounce before recovering some ground ahead of the close.
The focus now shifts to the Reserve Bank of Australia, set to announce its latest monetary policy decision. The central bank is expected to raise rates for the first time in over a decade as inflationary pressures reach Australian shores. Still, the RBA has been quite behind the curve, maintaining a “patient” stance until a couple of months ago. Policymakers gave up on evidence that the country is not immune to global bottlenecks and higher energy prices that have put pressure on prices. Market participants are anticipating a between 15-25 bps hike, which may provide temporal support to the local currency.
AUD/USD short-term technical outlook
The AUD/USD pair keeps approaching the year’s low posted in January at 0.6966. The daily chart shows technical indicators maintaining their bearish slopes, despite being in extreme oversold territory, as the pair develops over 200 pips below its 100 and 200 SMAs. The 20 SMA, in the meantime, gains bearish traction above the longer ones. A corrective advance is possible, but the pair needs to regain at least the 0.7230 to have the potential strength for a bullish reversal.
The pair is also bearish in the near term, and according to the 4-hour chart. The 20 SMA heads firmly lower, providing an intraday dynamic resistance at around 0.7090, while the longer ones offer bearish slopes far above the shorter one. Technical indicators, in the meantime, remain within negative levels, the Momentum aiming higher within range but the RSI stable at around 35.
Support levels: 0.7030 0.6995 0.6960
Resistance levels: 0.7050 0.7090 0.7135
View Live Chart for the AUD/USD
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