Forex trading: The AUD/USD ended lower under Economic data pressures

In forex trading market, the AUD/USD's downturn continues, driven by economic data, political dynamics, and Chinese fiscal influences.

The AUD/USD finished the week lower at 0.6706, down 0.63%, marking its third consecutive week of declines from the 0.6942 high reached on the last trading day of September. The pair continues to face pressure from the same factors that were highlighted last week.

Economic data pressures

Building on the solid momentum from the robust September non-farm payrolls report released in early October, last week’s economic data outperformed expectations, despite being primarily considered second-tier.

Notably, the figures for retail sales and initial jobless claims caught many off guard, even challenging the most steadfast advocates of a hard landing. These developments led interest rate traders to rethink their dovish stance on the Federal Reserve, further strengthening the US dollar.

Political Dynamics

While Kamala Harris maintains a narrow lead in national polls, the real competition lies in state-level contests governed by the US Electoral College system. Donald Trump currently leads in six key battleground states, making him the frontrunner to reclaim the White House.

This situation has led to a resurgence of "Trump trades," resulting in gains for the US dollar, which stands to benefit from the potential implementation of new trade tariffs and increased fiscal spending.

China’s Influence and Australian Outlook

The rally to a high of 0.6942 in late September was fueled in part by expectations of fiscal stimulus from China following a dovish shift in policy. While the intent is evident, there is still uncertainty regarding the size, timing, and specifics of China’s fiscal stimulus package. Many are now looking to the upcoming National People's Congress standing committee meeting for more clarity.

With a light data calendar in Australia this week, we anticipate that these factors will largely drive the movement of AUD/USD until the release of key Australian third-quarter (Q3) consumer price index (CPI) data next week. Adjustments to Fed rate expectations and robust Australian employment figures have prompted the Australian interest rate market to delay the anticipated timing of the Reserve Bank of Australia’s (RBA) first full rate cut to April 2025.

AUD/USD Technical Analysis

Three weeks ago, the AUD/USD encountered resistance at the multi-month downtrend level of 0.6900/10, as illustrated in the weekly chart below. This resistance originates from the 0.8007 high reached in February 2021 and the 1.1081 high from July 2011.

Since then, the AUD/USD has primarily faced downward pressure, but it found some buying interest late last week near the 0.6650/25 support zone, which includes the 200-day moving average at 0.6627.

As long as the AUD/USD remains above the 0.6650/25 support band, the current rebound can continue toward the resistance level at 0.6750/60. However, if the AUD/USD breaks sustainedly below this support, it could trigger a sell-off, potentially extending to the next support level at 0.6575/60, with the possibility of dropping as low as 0.6500.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.