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Fundamental Analysis

Australian Dollar Trims Intraday Losses; AUD/USD Rebounds from 0.6400 Region

Australian Dollar Rebounds

Australian Dollar Trims Intraday Losses; AUD/USD Rebounds from 0.6400 Region

The Australian Dollar (AUD) trims a part of its heavy intraday losses and assists the AUD/USD pair to rebound around 35-40 pips from the 0.6400 neighborhood or the lowest level since August 5. Any meaningful recovery, however, seems elusive in the wake of rising bets for an early interest rate cut by the Reserve Bank of Australia (RBA), bolstered by softer domestic growth figures released earlier this Wednesday.

Apart from this, concerns about fragile economic recovery in China, US President-elect Donald Trump’s impending tariffs and trade war fears should contribute to capping the China-proxy Aussie. Traders might also opt to wait for cues about the future rate-cut path from Federal Reserve (Fed) Chair Jerome Powell’s speech. The outlook will drive the US Dollar (USD) demand and provide a fresh impetus to the AUD/USD.

AUD/USD bears have the upper hand after short-term trading range breakdown

The technical analysis you’ve outlined for the AUD/USD pair indicates a cautious outlook with potential for further downside movement. Here’s a breakdown of the key points:

  1. Downside Risk Below 0.6440-0.6435: A break below this region suggests a breakdown of the current short-term range, which could open the door to further declines. The fact that oscillators are still in negative territory and not yet oversold supports the view of continued bearish momentum.
  2. Potential Support Near 0.6400 and 0.6350: If the pair weakens further, the next immediate support level is near 0.6400. If this level fails to hold, the pair could retest the year-to-date low around 0.6350-0.6345, which was touched in August.
  3. Resistance Above 0.6500: A recovery above the 0.6500 level would face significant resistance around the 0.6535-0.6540 zone. If the pair manages to break through this, it could signal a stronger recovery and push toward the 0.6600 level.
  4. Bullish Scenario: For a more bullish outlook, sustained strength above the 0.6535-0.6540 area could trigger a short-covering rally and lead to a move toward 0.6600. If the pair clears the 200- and 50-day Simple Moving Averages (SMAs) near the 0.6625-0.6630 region, it would signal a shift in sentiment and could pave the way for further gains.

Overall, the technical picture suggests that unless AUD/USD shows a solid recovery above key resistance levels, the pair remains vulnerable to further downside risks.