Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6725.
- Timeline: 1-2 days.
Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.6750.
- Add a stop-loss at 0.6600.
The AUD/USD pair slipped to the lowest level in over a month after the International Monetary Fund (IMF) warned about the Australian economy. It fell to a low of 0.6653, much lower than the year-to-date high of 0.6942.
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Australia and Global Economic Forecast
The AUD/USD pair dropped after the IMF lowered the global growth estimate for 2025, citing the risk of trade wars and protectionism. In a report, the organization said that the economy would expand by 3.2% this year and the same pace in 2025. Its previous forecast was for the economy to grow by 3.3% in 2025.
The IMF also expects the Australian economy to grow by 2.1% next year, lower than the previous estimate of 2.2%. Most notably, it expects that Australia’s inflation will remain at an elevated level during the year, while the unemployment rate will rise a bit.
IMF forecasts for the global economy are important for the Australian dollar because of the impact on commodity prices like iron ore and coal. A weaker economy, especially in China, means low consumption of Australia's biggest exports.
The AUD/USD exchange pair also retreated because of the stronger US dollar as hopes that the Federal Reserve may not cut interest as quickly as the market was expecting. Analysts see the bank switching to 0.25% cuts instead of the 0.50% that it had hinted before.
In a statement this week, Mary Daly of the San Francisco Fed said that she supported more cuts because of the challenges in the labor market and the fact that inflation was moving to the 2% target.
The only events and data that may move the AUD/USD pair on Wednesday will be the US existing home sales data, the Fed Beige Book, and a statement by Tom Barkin.
AUD/USD Technical Analysis
The AUD/USD exchange rate has been in a strong downward trend as the US dollar rally gained steam, with the DXY index rising to $104.
The pair crashed below the important support level at 0.6795, its highest point on June 12. It also slipped below the first support of the Woodie pivot point at 0.6750.
The Percentage Price Oscillator (PPO) has continued falling, with its histogram remaining below the zero line since October 3.
Therefore, with no major economic data expected on Wednesday, the path of the least resistance for the pair is downwards, with the next level to watch being at 0.6600.
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