AUD/USD Forecast: Direction remains clearly to the downside

AUD/USD Current Price: 0.6403

• The rebound of the Aussie loses momentum amid risk aversion.
• Australian employment data weighs on the Aussie, while US Philly Fed surpasses expectations.
• The AUD/USD pair shows some signs of potential consolidation, but no recovery is in sight.

The AUD/USD failed to hold gains during the American session due to a strong US Dollar, and it was on track for its eighth consecutive daily decline. Despite the ongoing negative momentum, the rebound from 0.6360 suggests the possibility of consolidation ahead, but the direction is clear. 

The Australian Dollar lost ground during the Asian session following the release of the Australian July labor report, which came in below expectations with a loss of 14,600 jobs instead of the anticipated 15,000 increase. Another negative surprise was the Unemployment Rate, which rose to 3.7% despite a decline in the Participation Rate from 66.8% to 66.7%. Analysts noted that "seasonal volatility" might have influenced the numbers.

These figures increased expectations that the Reserve Bank of Australia (RBA) won't raise interest rates again, which was the main factor behind the AUD's weakness earlier on Thursday. However, AUD/USD sharply rebounded later, climbing above 0.6450. Nevertheless, during the American hours, it turned downwards again, falling back below 0.6400. 

The resumption of the downside movement coincided with a decline in equity prices on Wall Street and lower commodity prices. With markets remaining cautious, the odds of a stabilization in the AUD/USD pair are low. Additionally, US Treasury yields are rising, commodity prices remain under pressure, and there is evidence of weakness in the Chinese economy. All of these factors reinforce an environment that could continue pushing AUD/USD lower, with minor short-lived corrections like the one experienced on Thursday.

AUD/USD short-term technical outlook

After a brief correction, the AUD/USD resumed its downward movement, falling back to the 0.6400 area. The pair hit a bottom at 0.6363, the lowest level since November. The Relative Strength Index (RSI) dropped below 30, indicating oversold conditions. This suggests a potential rebound or consolidation around current levels. However, the overall sentiment remains negative, with the pair heading towards its fourth consecutive weekly decline. Any recovery is likely to be seen as corrective.

On the 4-hour chart, the bias for AUD/USD remains firmly to the downside, with further losses expected. On the flip side, initial support stands at 0.6380, which protects the recent low. If the pair falls below 0.6350, the next target would be 0.6325. On the upside, the key resistance level in the short term is at 0.6445. A break above that level could alleviate bearish pressure and indicate a consolidation phase before another leg lower.

Support levels: 0.6380 0.6350 0.6325

Resistance levels: 0.6445 0.6475 0.6505

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