- AUD/USD drifts lower on Monday as China's fiscal stimulus fails to inspire bullish traders.
- Softer Chinese inflation figures and a modest USD strength further weigh on the major.
- The RBA’s hawkish stance and bets for more Fed rate cuts help limit losses for the pair.
The AUD/USD pair attracts fresh sellers at the start of a new week in reaction to the disappointment over China's fiscal stimulus promised over the weekend and softer inflation figures. China’s Minister of Finance Lan Fo’an signaled more debt issuance amid efforts to shore up the domestic economy and said on Saturday that the central government has a rather large space to increase the deficit. Lan, however, noted such policies are still under discussion and fell short of providing specific details. Adding to this, the official data showed on Sunday that China's consumer inflation unexpectedly eased in September and producer price deflation deepened.
According to the National Bureau of Statistics (NBS), China's headline Consumer Price Index (CPI) rose 0.4% from a year earlier, down from a 0.6% increase recorded in August and short of market expectations. Furthermore, the Producer Price Index (PPI) fell at the fastest pace in six months, by 2.8% year-on-year in September versus a 1.8% decline reported in the previous month and below consensus estimates. The data pointed to weak domestic demand and economic challenges, which tend to undermine demand for the China-proxy Australian Dollar (AUD). Apart from this, a modest US Dollar (USD) strength exerts some pressure on the AUD/USD pair.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands tall near a two-week high as traders now seem to have fully priced out the possibility of another oversized rate cut by the Federal Reserve (Fed) in November. That said, the US central bank is still expected to lower borrowing costs by 25 basis points in November amid indications of labor market weakness. This, in turn, is seen acting as a headwind for the USD and offering support to the AUD/USD pair amid the Reserve Bank of Australia's (RBA) hawkish stance. Hence, it will be prudent to wait for strong follow-through selling before placing bearish bets around the currency pair.
Technical Outlook
The 0.6700 round-figure mark or a four-week low touched last Thursday, might continue to act as an immediate support. A sustained weakness below will confirm a near-term breakdown through the 50-day Simple Moving Average (SMA) and pave the way for deeper losses. The AUD/USD pair might then accelerate the fall towards the September swing low, around the 0.6625-0.6620 region, en route to the 0.6600 mark and the next relevant support near the 0.6565-0.6560 zone.
On the flip side, any attempted recovery beyond the 0.6760 horizontal resistance is likely to attract fresh sellers and remain capped near the 0.6800 mark. The latter should act as a key pivotal point, which if cleared decisively could lift the AUD/USD pair to the 0.6850-0.6855 area en route to the 0.6880 hurdle and the 0.6900 round figure. The momentum could extend further towards the 0.6940-0.6945 region, or the highest level since February 2023 touched last month.
AUD/USD daily chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to recovery gains near 1.0850 ahead of Fedspeak
EUR/USD trades in positive territory near 1.0850 on Friday following a four-day slide. China's stimulus optimism and a broad US Dollar correction help the pair retrace the dovish ECB decision-induced decline. All eyes remain on the Fedspeak.
GBP/USD pares UK data-led gains at around 1.3050
GBP/USD is trading at around 1.3050 in the second half of the day on Friday, supported by upbeat UK Retail Sales data and a pullback seen in the US Dollar. Later in the day, comments from Federal Reserve officials will be scrutinized by market participants.
Gold at new record peaks above $2,700 on increased prospects of global easing
Gold (XAU/USD) establishes a foothold above the $2,700 psychological level on Friday after piercing through above this level on the previous day, setting yet another fresh all-time high. Growing prospects of a globally low interest rate environment boost the yellow metal.
Crypto ETF adoption should pick up pace despite slow start, analysts say
Big institutional investors are still wary of allocating funds in Bitcoin spot ETFs, delaying adoption by traditional investors. Demand is expected to increase in the mid-term once institutions open the gates to the crypto asset class.
Canada debates whether to supersize rate cuts
A fourth consecutive Bank of Canada rate cut is expected, but the market senses it will accelerate the move towards neutral policy rates with a 50bp step change. Inflation is finally below target and unemployment is trending higher, but the economy is still growing.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.