The Australian Dollar (AUD) is losing ground in early European trading on Tuesday. Disappointing news from China’s National Development and Reform Commission, which didn’t announce any major new stimulus measures, has weighed on the Aussie. China’s economy is facing increasingly complex challenges both internally and externally, leaving traders disappointed. Adding to the pressure, the escalating geopolitical tensions in the Middle East have created a risk-off environment, leading investors to move away from riskier assets like the AUD.
Despite this, the Aussie’s downside may be limited due to the Reserve Bank of Australia’s (RBA) hawkish stance following its September Meeting Minutes. Investors are now waiting for comments from US Federal Reserve officials later on Tuesday for more direction ahead of the Federal Open Market Committee (FOMC) Minutes. Attention will also shift to the US Consumer Price Index (CPI) report for September, set for release on Thursday.
Market Movers: Australian Dollar Loses Momentum
The Australian Dollar has been under pressure following China’s state planner’s remarks. During the RBA’s September meeting, board members discussed both the possibility of raising and lowering interest rates in the future. The RBA emphasized that its policy will remain tight until inflation clearly moves toward the target range. Deputy Governor Andrew Hauser reiterated that bringing down inflation is a major challenge, and the central bank is not done yet.
In the US, St. Louis Fed President Alberto Musalem indicated he supports further rate cuts as the economy evolves, while Minneapolis Fed President Neel Kashkari backed a 50 basis point rate cut, noting the risks are shifting from high inflation to potential higher unemployment. The odds of a 25 bps rate cut by the Fed in November have risen significantly, now sitting at 85%, up from 31.1% last week, according to the CME Fed-Watch Tool.
Technical Outlook : Australian Dollar Holding Its Ground
Technically, the Australian Dollar is attempting to bounce back. The AUD/USD pair is staying within the lower end of its ascending trend channel and is still supported by the 100-day Exponential Moving Average (EMA). However, further consolidation or a dip remains possible, especially as the 14-day Relative Strength Index (RSI) is just below the midline at 47.0.
Key support for AUD/USD lies at 0.6735, and a break below this level could trigger further downside momentum, bringing the pair closer to the 0.6700 psychological level. The next downside marker is at 0.6622, which was the low point on September 11.
On the upside, the first hurdle is 0.6823, the high reached on August 29. If the pair can surpass this level, it may pave the way for a move toward 0.6942, the high of September 30, with a potential to reach the upper limit of the trend channel at 0.6980.
