AUD/USD Price Forecast: Holds key support of 20-day EMA
The AUD/USD pair corrects to near the round-level support of 0.6700 in Friday’s European session. The Aussie asset declines as the Australian Dollar (AUD) weakens amid growing worries over Australia’s economic growth due to the maintenance of high interest rates by the Reserve Bank of Australia (RBA).
Market experts worry that a long RBA hawkish interest rate stance could deteriorate labor market conditions. However, RBA officials continue to support maintaining their Official Cash Rate (OCR) higher as the battle against inflationary pressures is far from over.
Meanwhile, the US Dollar (USD) is also underperforming against its major peers as softer-than-expected United States (US) annual Producer Price Index (PPI) data for August has brought the debate over the likely interest rate cut to size by the Federal Reserve (Fed) back on the table. Market speculation for the Fed to start reducing interest rates aggressively from Thursday has strengthened. The CME FedWatch tool shows that the probability of the Fed reducing interest rates by 50 basis points (bps) to 4.75%-5.00% in September has increased sharply to 43%.
AUD/USD bounces back sharply after retracing 38.2% of the last swing high (plotted from August 5 low near 0.6350 to August 29 high of 0.6824) at 0.6643 on a daily timeframe. The asset has mildly corrected but is holding the key 20-day Exponential Moving Average (EMA), which trades around 0.6700.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend ahead.
The Aussie asset would witness a fresh upside move if it breaks above the September 6 high of 0.6767, which will drive the asset toward the round-level resistance of 0.6800 and the Year-To-Date (YTD) high of 0.6840.
On the flip side, a downside move below the weekly low of 0.6622 will drag the asset towards a 50% Fibonacci retracement at 0.6587, followed by an August 6 high of 0.6542.
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