Australian Dollar Slumps as AUD/USD Falls Below Key Support Level Amid Risk-Off Sentiment

Forex

Summary:

The Australian dollar has fallen sharply below the 0.6750 support level against the U.S. dollar, reflecting a risk-off sentiment and the strengthening greenback.

SELL AUDUSD

Close Time

CLOSED

0.67300

Entry Price

0.66100

0.68300

0.66523 +0.00003 +0.00%

3.7

Pips

Profit

0.66100

0.67263

Exit Price

0.67300

Entry Price

0.68300

In a notable decline, the Australian dollar has tumbled below the significant support level of 0.6750 against the U.S. dollar, as global risk aversion intensifies. The AUD/USD pair's steep drop on Tuesday's European trading session underscores growing investor caution and the strengthening of the U.S. dollar ahead of a pivotal week of economic data releases.

The U.S. dollar has shown resilience, with the U.S. Dollar Index (DXY), which measures the greenback against a basket of major currencies, approaching a two-week high near 102.00. This uptick in the dollar is driven by diminishing expectations for an aggressive Federal Reserve rate cut this month. Recent market sentiment has shifted as speculation about a 50 basis point rate cut by the Fed has waned, partly due to stronger-than-expected U.S. economic indicators. The revised estimate for the U.S. second-quarter Gross Domestic Product (GDP) growth has come in at 3%, surpassing the initial forecast of 2.8%, reflecting a more robust economic performance.

The shift in expectations is also evident in the futures markets, where S&P 500 futures have experienced notable declines during European trading hours. Investors are recalibrating their views on future monetary policy, with the Fed's interest rate trajectory now in focus. This week, all eyes will be on the U.S. Nonfarm Payrolls (NFP) report for August, scheduled for release on Friday, which is anticipated to provide further clues on the labor market's health and the Fed's potential policy moves. In the meantime, the U.S. ISM Manufacturing PMI for August, due for release at 14:00 GMT on Tuesday, is expected to show a slower contraction in manufacturing activity, with a forecasted PMI of 47.5 compared to July's 46.8.

On the Australian front, the bearish sentiment surrounding the Australian dollar is exacerbated by a global risk-off mood, which generally disfavors riskier assets. Domestic factors are also contributing to the weakness in the AUD. Investors are awaiting the release of Australia's Q2 GDP data on Wednesday, with forecasts suggesting a 0.3% growth rate, an improvement from the 0.1% growth recorded in the first quarter. This data will be crucial in shaping expectations for the Reserve Bank of Australia's (RBA) monetary policy.

Further impacting the AUD, investors will be closely watching Reserve Bank of Australia (RBA) Governor Michele Bullock's speech on Thursday. Any signals from Bullock regarding the potential for policy normalization or adjustments in the RBA’s stance will be closely scrutinized for insights into the future direction of Australian monetary policy.

Technical Analysis

From a technical standpoint, the AUD/USD pair has achieved the anticipated key level of 0.6728 and is currently finding solid support at this level. However, the outlook remains bearish, with potential for further declines. If the support at 0.6728 is breached, the pair could extend its downward movement towards additional targets at 0.6695 and subsequently 0.6610.

The prevailing bearish trend suggests that unless there is a significant rebound that breaks above current resistance levels, the AUD/USD pair will likely continue its downward trajectory. A failure to sustain above the 0.6728 support level could lead to further weakness. Conversely, if the pair fails to break below this support, a new bullish wave could develop, targeting higher resistance levels around 0.6800.

For today's trading session, the expected range for AUD/USD is between 0.6700 support and 0.6800 resistance. The overall trend forecast remains bearish, driven by both technical indicators and prevailing market conditions.

TRADE RECOMMENDATION

SELL AUDUSD

ENTRY PRICE: 0.67300

STOP LOSS: 0.68300

TAKE PROFIT: 0.6610

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