The Australian Dollar (AUD) has experienced a decline following the release of disappointing Gross Domestic Product (GDP) figures. The Australian economy expanded by only 0.3% in the third quarter, falling short of expectations. This weaker growth may prompt the Reserve Bank of Australia (RBA) to consider lower interest rates, especially since current inflation has settled within the RBA’s target range of 2% – 3%. Compounding these domestic challenges are external pressures, including China’s ongoing economic struggles and heightened fears related to the US-China trade rift, which weigh heavily on the AUD.
In contrast, the US Dollar (USD) remains relatively firm, buoyed by expectations of a hawkish stance from the Federal Reserve. However, traders are largely in a wait-and-see mode as they anticipate key economic announcements, including a speech by Fed Chair Jerome Powell. The AUD/USD currency pair has managed to remain above recent lows, suggesting that a cautious approach is being adopted by both buyers and sellers in the market.
Recent reports reveal a decline in China’s Services Purchasing Managers’ Index (PMI), indicative of a slowdown in that sector. Alongside this, the US government has imposed new export restrictions targeting China’s technology sector, raising concerns about the long-term impact on economic cooperation between the two countries. These factors further contribute to an uncertain economic environment for the Australian Dollar, which is often viewed as a proxy for China’s economic health.
As market participants look ahead, the focus shifts toward Powell’s upcoming speech, which could significantly influence monetary policy expectations. The AUD/USD pair is also under scrutiny, with immediate support seen around 0.6440 – 0.6435. Should the pair break below this range, further declines may ensue, potentially testing the critical psychological barrier of 0.6400. Conversely, a rebound above 0.6500 may face resistance, but a sustained push beyond this level could lead to a rally, targeting higher levels around 0.6600. Overall, the market landscape indicates a cautious sentiment, with traders bracing for upcoming economic data that will shape market directions.
