Published on Jul 17, 2023

AUD/USD Price Analysis: Holding Firm at 0.6800 Amid USD Index Retreat- 17-07-2023.

AUD/USD Analysis

Key Points: -

· AUD/USD gains ground to recover from earlier losses during a lackluster trading session.

· The pair faces mixed data from China and concerns about Australia's economic slowdown, coupled with an increase in the unemployment rate, which prompts buyers to support the Aussie pair.

· While the market is consolidating ahead of the Federal Reserve's blackout period, which favors the US Dollar, the absence of significant data/events and Japan's holiday restricts the bullish momentum for the Dollar.

· In the absence of major data releases, market participants will closely monitor second-tier US data and risk catalysts for intraday clues. Additionally, the Reserve Bank of Australia (RBA) Minutes, Australian jobs report, and US Retail Sales figures will be crucial factors to watch.

Today's Scenario: -

AUD/USD has rebounded from its intraday low to reach 0.6820 as Monday's European session begins, paring its daily losses in what has been a slow start to the week. However, the Aussie pair remains under pressure for the second consecutive day, driven by concerns about weak economic conditions in Australia and its major trading partner, China.

Additionally, the market's consolidation of US Dollar losses ahead of the late July Federal Reserve (Fed) meeting is also weighing on the AUD/USD pair.

Meanwhile, the US Dollar Index (DXY), which measures the greenback against six major currencies, has retreated from its intraday high to 99.95. This pullback follows a corrective bounce on Friday from its lowest levels since April 2022, which was primarily driven by positive sentiment data and inflation expectations in the US.

The AUD/USD price is also being influenced by downbeat economic data from China. Despite the pair's corrective bounce, the second-quarter (Q2) 2023 Gross Domestic Product (GDP) figures for China exceeded market forecasts, with a QoQ growth of 0.8% compared to the expected 0.5%, and a YoY growth of 6.3% surpassing estimates of 7.3%. However, concerns arise from the decline in Retail Sales to 3.1% from the previous figure of 12.7%, falling short of the market consensus of 3.2%. Notably, China's June survey-based Jobless Rate for 24-year-olds reached a record high of 21.3%. These developments have contributed to the downward pressure on the AUD/USD pair.

Mixed concerns about global inflation, as highlighted by the International Monetary Fund (IMF), have also renewed fears and dampened risk appetite during the pre-Fed blackout period, further impacting the AUD/USD price.

Additionally, Australian Treasurer Jim Chalmers' economic concerns, combined with the downbeat statistics from China, have contributed to the mild losses in the AUD/USD pair. On the other hand, the reopening of Western markets after the weekend has allowed US Dollar bears to recover from the previous day's corrective bounces.

Moreover, the hope that the Reserve Bank of Australia (RBA) will maintain a less dovish stance, despite recent weak Australian data, has supported the AUD/USD pair in bouncing back from intraday lows.

Looking ahead, the RBA Minutes and Australian employment data for June, along with the election of Michele Bullock as the next Governor, will be crucial factors influencing the AUD/USD price. The market is also preparing for the upcoming monetary policy decision by the Federal Reserve later in July.

Diagram of AUD/USD: -

Economic Events: -

Buy Scenario: -

The AUD/USD pair is currently displaying a bearish momentum, indicating a potential continuation of the downward movement towards the first support level.

The first support level is situated at 0.6778, which is backed by a pullback support and a 38.20% Fibonacci retracement level. This level may offer substantial support to the price. If the price manages to break below this level, the second support is located at 0.6596, representing a support level formed by multiple swings, and it may provide additional protection against further downward pressure. Till we do not advise to buy AUD/USD.

Sell Scenario: -

On the other hand, regarding resistance levels, the first level at 0.6888 could act as a barrier for any upward price movement. This level is determined by a resistance formed by a previous swing high. If the price surpasses this resistance level, it will encounter the second resistance at 0.7026, characterized by an overlapping resistance and a 100% Fibonacci projection. This level could have a significant impact on determining the future direction of the pair. Till we do not advise to sell AUD/USD.