The AUD/USD currency pair has begun the week on a downward trajectory as traders react to China’s lackluster fiscal stimulus announcements and disappointing inflation data. Despite expectations for comprehensive policy measures to boost the Chinese economy, the details provided were vague, failing to instill confidence among investors. China’s finance officials suggested a potential increase in debt issuance but did not offer concrete plans or timelines, leaving markets uncertain.
The latest data from China’s National Bureau of Statistics indicates a slowdown in consumer inflation, with the Consumer Price Index (CPI) rising just 0.4% year-on-year for September, compared to a 0.6% rise in August. Additionally, the Producer Price Index (PPI) experienced a significant drop, falling 2.8% on a yearly basis, which highlights the ongoing challenges in domestic demand. These economic indicators negatively impact the Australian Dollar, which is often perceived as a proxy for Chinese economic performance.
On the other hand, the US Dollar is exhibiting modest strength, as evidenced by the Dollar Index trading near a two-week high. This follows market reassessments regarding interest rate cuts from the Federal Reserve. Currently, traders have largely dismissed the prospect of a substantial cut in November. However, a smaller reduction of 25 basis points is anticipated due to signs of a weakening labor market. This scenario creates a balancing effect for the AUD/USD pair, as the Reserve Bank of Australia maintains a hawkish stance.
From a technical perspective, the AUD/USD pair faces key levels of support and resistance. The round figure of 0.6700, reached last week, may serve as immediate support; a decline below this level could suggest further bearish momentum. Conversely, a rebound above the 0.6760 resistance might stimulate selling pressure around the 0.6800 threshold. Clear movement past 0.6800 could potentially direct the pair toward higher targets, with significant resistance levels around 0.6850 and further up to 0.6940.
