Bearish Engulfing Candlestick Sent AUDUSD Closed Below 0.68

Last week AUDUSD made a sharp reversal, losing more than 1 cent and forming a bearish engulfing candlestick on the weekly chart, falling below 0.68 as well where it closed the week. The environment turned bullish for the USD, while risk currencies ended the week lower, however, AUD/USD sellers are facing the 100 weekly SMA below and development in China are positive.

Bearish Reversal Amid Strong US Data and Powell’s Tone

Last week, the pair encountered a reversal, dropping by about 150 pips and falling below 0.68. This decline followed Fed Chair Jerome Powell’s cautious tone regarding future rate cuts, combined with strong US employment data. The surge in September’s Non-Farm Payrolls (NFP) and a near 4% unemployment rate reduced the probability of an additional 50 basis point rate cut at the November Fed meeting.

AUD/USD Chart Weekly – Facing the 100 SMA Below

Impact of China’s Economic Stimulus on AUD/USD

China’s extensive stimulus measures, including reduced down-payment ratios, mortgage rates, and relaxed property buying restrictions, provided support for the AUD. Recent data indicating an uptick in China’s housing sales over the holiday weekend also hinted at a potential recovery in the property sector. While these developments initially boosted AUD/USD, Powell’s remarks and strong US data have tempered the pair’s upward movement, highlighting the renewed strength of the USD.

Key Technical Levels to Watch

Looking ahead, AUD/USD is approaching the 100-week Simple Moving Average (SMA) around the 0.6760 level, which could serve as a support point. Additionally, the 50% retracement level of the recent rise from the September 11 low, near 0.6781, marks another important support area. A move below these levels could signal further downside potential for the pair, as traders keep an eye on both US and Chinese economic developments.

Last night we had the MI Inflation Gauge which came after a 0.1% decline in August.

• September 2024 Melbourne Institute Inflation (m/m): Rose by 0.1% compared to the previous month.
  • August: Recorded a flat 0% increase month-over-month.
• September MI Inflation Gauge (YoY): Increased to 2.6%, up from 2.5% in August.
  • This year-over-year measure suggests a slight rise in inflationary pressure compared to the previous month.
• Core (Trimmed Mean) Inflation (m/m): Also saw a 0.1% increase in September.
  • Prior Core (m/m): Held steady at 0% in August.
• The modest monthly increase aligns with broader inflation trends, while the yearly gauge signals potential sustained inflation growth. This could factor into monetary policy considerations, especially if the trend continues in coming months.

AUD/USD Live Chart