AUD/USD Eyes $0.6900 on China Stimulus and Weak US Dollar, Up 0.25%

During Tuesday’s European trading session, the AUD/USD pair continued its upward momentum, hovering near the 0.6850 mark and briefly reaching an intra-day high of 0.6870.

This rise is attributed to favourable market sentiment, which typically benefits risk-sensitive currencies like the Australian dollar. The decline in the US dollar further boosted the AUD/USD pair, driven by expectations of aggressive policy easing by the Federal Reserve.

Another factor supporting the Australian dollar’s strength is China’s stimulus measures aimed at reviving its economy. China, Australia’s largest trading partner, announced a 50 basis point cut to the Reserve Requirement Ratio (RRR), which will release approximately 1 trillion yuan for new lending.

This move is expected to benefit the Australian economy, reinforcing the positive sentiment surrounding the AUD/USD pair.

RBA’s Steady Rates and China’s Economic Boost Keep AUD/USD Bullish

On the domestic front, the Reserve Bank of Australia (RBA) held its interest rates steady for the seventh consecutive meeting. The central bank emphasized that its policy would remain restrictive until inflation trends downward towards its target.

RBA Governor Michele Bullock highlighted that recent economic data has not influenced the bank’s cautious approach, affirming its current stance.

Meanwhile, China’s stimulus measures, particularly the PBOC’s decision to ease lending conditions, provided additional momentum for the AUD/USD pair.

Given Australia’s close economic ties with China, these developments are expected to act as a tailwind for the Australian dollar. The continued weakness in the US dollar has also created a favourable environment for further upside in the AUD/USD pair.

Weak US Dollar and Global Equities Strengthen AUD/USD Outlook

The US dollar remains under pressure due to growing expectations that the Federal Reserve may pursue aggressive policy easing.

This outlook has weakened the dollar’s recovery, allowing the Australian dollar to benefit. Furthermore, the strong performance of global equity markets has reduced demand for the US dollar as a safe-haven asset, further supporting the AUD/USD’s bullish momentum.

Technically, AUD/USD is trading at $0.68304, up 0.25%, supported by its 50-day Exponential Moving Average (EMA) of $0.6811.

Immediate resistance is seen at $0.6870, while further resistance levels stand at $0.6902 and $0.6928. On the downside, immediate support is located at $0.6784, with further support at $0.6757 and $0.6725.

The Relative Strength Index (RSI) at 51 suggests a neutral stance, providing room for movement in either direction.

A break above $0.6870 could trigger a rally toward $0.6902 and $0.6928, while a drop below $0.68084 may shift momentum to the downside, with a stop-loss target near $0.67798.Key Insights:

• Immediate Resistance: $0.6870, with further targets at $0.6902 and $0.6928.
• Immediate Support: $0.6784, followed by $0.6757 and $0.6725.
• RSI: Positioned at 51, indicating neutral momentum with potential for upward movement.

In conclusion, the AUD/USD pair is primed for further gains, particularly if it breaks above $0.6870. However, traders should remain cautious of a potential shift if prices fall below key support levels.