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AUD vs USD, Which Currency Is Superior for Trading? The AUD/USD currency pair shows interesting buying action after a decline from recent multi-day highs.
In Wednesday's Asian session, the spot price is currently trading around the 0.6400 level, up over 0.40% today. It is likely to continue recovering from its recent low, which was the lowest since November 2022, reached last Thursday. This comes amid a weaker sentiment for the US Dollar (USD).
The USD Index (DXY), which measures the value of the US Dollar against several other currencies, has declined after reaching a two-month high, coinciding with falling US Treasury yields.
Additionally, a generally positive sentiment in US equity futures is prompting profit-taking from safe-haven assets, benefiting the Australian Dollar (AUD), which is typically associated with risk. This is supported by hopes for more stimulus from China, as well as signs of easing trade tensions between the US and China, which have improved global risk sentiment slightly.
It's worth noting that the Bureau of Industry and Security (BIS) in the US Department of Commerce announced on Monday that it would remove 27 entities from China from its Unverified List. This move was well-received by China, which views it as a factor supporting smoother trade between the two countries.
This event comes ahead of US Commerce Secretary Gina Raimondo's visit to China from August 27-30, where she is scheduled to meet with senior Chinese officials and US business leaders. However, concerns over a slowing Chinese economy continue to dampen optimism, and the Australian Dollar, often seen as a reflection of China's economic health, remains affected.
The more conservative rate cuts implemented by the People's Bank of China (PBoC) indicate limited policy support for the economy, despite the ongoing crisis in the domestic property sector worsening, without significantly alleviating fears of a deteriorating economic situation.
Alongside data showing weakening in Australia's Manufacturing Index, this may hinder traders from adopting aggressive optimistic positions on the AUD/USD pair. A recent survey by Judo Bank revealed that the manufacturing sector in Australia continues to contract in August, while the services sector is experiencing its fastest contraction in 19 months.
Furthermore, the increasing belief that the Federal Reserve (Fed) will maintain its hawkish stance and keep interest rates higher for an extended period supports the USD's strength. This strengthening is likely to restrict movements in the AUD/USD pair.
Market participants are currently awaiting the release of the US Manufacturing and Services Initial Index data for new momentum at the start of North American trading. However, the main focus will remain on the Jackson Hole Symposium, where comments from Fed Chair Jerome Powell are expected to provide clues about the future direction of interest rate hikes, which could, in turn, boost demand for the USD in the near term.
Warning!
This analysis is based on fundamental and technical perspectives from trusted sources and is not intended as advice or solicitation. Always remember that this content aims to enrich the reader's information. Always conduct independent research on other forex information to serve as a reference in your trading.
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