The Australian Dollar (AUD) faced further pressure on Wednesday, dropping below 0.6600 against the US Dollar (USD). This decline was primarily attributed to growing worries about China’s economic health, compounded by falling iron ore prices and weaker-than-expected Australian Judo Bank Flash PMI data.
Despite the apparent weakening of the Australian economy, the Reserve Bank of Australia (RBA) remains hesitant to implement rate cuts due to persistent inflation concerns. This hawkish stance could potentially limit the extent of the AUD’s depreciation.
Market Movers:
- China’s Economic Woes: China’s Q2 GDP figures missed expectations, reflecting weaker demand both domestically and internationally. The unexpected rate cut by the People’s Bank of China (PBoC) and the absence of significant stimulus measures have further exacerbated concerns about China’s economic outlook.
- Weak Judo Bank PMIs: Preliminary Judo Bank PMI readings revealed a decline in the Composite PMI, with the Manufacturing PMI slipping back into contraction territory.
Technical Analysis:
The AUD/USD pair’s breach below the 20- and 100-day Simple Moving Averages (SMA) raises red flags about the possibility of more than just a correction. However, as long as the pair remains above the 200-day SMA, the downward movement could still be considered corrective.
A drop below the 200-day SMA could trigger a sell signal, with the range between 0.6600 and 0.6580 becoming crucial for buyers to defend in order to prevent further losses.
