AUD/USD Daily Forecast: Break Below $0.6750 Signals Further Decline

During the European trading session, the AUD/USD currency pair continued its bearish trend, hitting an intra-day low of $0.6730 and hovering near $0.6732.

The primary driver of this decline is a strengthening US Dollar, supported by upbeat US economic data and rising Treasury yields. The US economy is expected to add 163,000 jobs in August, with the unemployment rate likely to dip slightly to 4.2%.

However, market expectations of a 25 basis point rate cut by the Federal Reserve in September could temper the dollar’s gains, creating potential volatility in the currency markets.

Recent US economic data has shown mixed signals. The headline Personal Consumption Expenditures (PCE) Price Index rose by 2.5% year-over-year in July, slightly below the anticipated 2.6%, while the core PCE grew by 2.6%, just under the 2.7% forecast. The US Gross Domestic Product (GDP) for Q2 exceeded expectations with a 3.0% annualized growth rate, further bolstering the dollar.

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Title: AUDUSD Set To Grow! BUY! Approaching a pivotal point at 0.6733, AUDUSD has a bullish bias with a safe stop loss at 0.6700. Supper Trend generates a buy signal while Pivot Point HL confirms the overall bullish trend. Goal at 0. pic.twitter.com/QjArkJaYFx

— Forex | ChartMonkey (@ChartMonkeyFX) September 3, 2024

Additionally, Initial Jobless Claims dropped to 231,000 for the week ending August 23, indicating a modest improvement in the labor market. Despite these positive indicators, Federal Reserve Atlanta President Raphael Bostic’s comments suggesting that rate cuts could be on the horizon due to cooling inflation and rising unemployment have created mixed expectations.

Australian Dollar Pressured by Weak Domestic Economic Data

The Australian Dollar is facing downward pressure from mixed domestic economic data. Although Australia’s Building Permits surged by 10.4% month-over-month in July, indicating a recovery in the construction sector, other economic indicators have been less positive.

Private Capital Expenditure unexpectedly fell by 2.2% in Q2, marking the first contraction in new capital spending since Q3 2023, and missing market expectations of a 1.0% increase. Meanwhile, Australia’s Monthly Consumer Price Index (CPI) rose by 3.5% year-on-year in July, down from 3.8% in June but slightly above the expected 3.4%. This CPI figure is the lowest since March, suggesting some easing in inflationary pressures.

Traders are now focusing on upcoming Australian Q2 GDP and July Trade Balance data, as well as a speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, for further insights into the central bank’s monetary policy outlook.

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AUD/USD Technical Outlook Suggests Continued Bearish Momentum

The AUD/USD is trading around $0.6742, showing signs of continued bearish momentum after breaking below a key support level at $0.6754. This level now acts as immediate resistance, and the breakdown below it suggests further declines could be on the horizon. The next support levels to watch are $0.6720, $0.6699, and $0.6677.

Technical indicators are aligned with the bearish trend. The Relative Strength Index (RSI) is at 33.73, indicating oversold conditions, which might prompt a short-term rebound. However, the 50-day Exponential Moving Average (EMA) at $0.6784 reinforces the resistance at this level, suggesting any recovery attempts may be limited.

Given the current price action and technical indicators, traders may consider a sell position below $0.6754, with a target at $0.6720 and a stop loss at $0.6770 to manage risk. The sustained breakdown below key support levels indicates that the bears are in control, and the AUD/USD pair could face further declines if it stays below the $0.6754 pivot point.