Daily Market Recap – AUDUSD Rebounds but the trend remains bearish

The

economic climate in Australia is getting worse and worse, as the August

PMI released on Monday proved. Not surprisingly since the lockdown in

Sydney has been extended to the end of September.

The

Australian dollar remains under pressure as the restraint measures have

the market concerned that the potential economic effects could cause

the Reserve Bank of Australia (RBA) to delay its plan to reduce asset

purchases. Although it did not do so at the last meeting in early

August, this option was discussed by board members. Given the evolution

of the pandemic, the discussion could intensify at the next meeting in

early September.

Labour

market conditions improved somewhat, as shown in the labor market

report for July last week. The unemployment rate fell much more sharply

than expected to 4.6 percent. However, this was primarily due to a drop

in the participation rate, a few new jobs were created. Moreover, the

labor market report is only one piece of the RBA's puzzle, albeit an

important one, when it comes to monetary policy.

The

RBA will be analyzed very carefully the Q2 GDP data due out shortly

before the RBA's September meeting, even though the lockdown measures

did not really take effect until the third quarter.

The

generally low-risk sentiment in the market is not exactly supportive of

the AUD either while the price of iron ore has also been adding

pressure on the Aussie. It has been under pressure for the past few

weeks. The country's main export commodity has suffered a noticeable

collapse in price, which is also due to China's announcement to cut

steel production.

The

strong rebound of the Australian dollar earlier this week has allowed

it to break out of its oversold territory. Prices could return to the

former support turned resistance at 0.7316 or even beyond the last high

at 0.7427 in the very near term.

(Chart Source: Tradingview 24.08.2021)

However,

despite this short-term recovery, the trend remains bearish below this

last threshold. The Aussie is in fact moving below the 200-period moving

average and the 20-period moving average. We will be watching for the

formation of candlesticks approaching these levels which could restart

the negative momentum.

Disclaimer:

This material has been created for information purposes only. All view

expressed in this document are my own and do not necessarily represent

the opinions of any entity.