**AUD/USD Tumbles Below 0.6400 as US Dollar Strengthens: Market Update and Analysis**
*Article based on original reporting by Adam Button, Forexlive Chief Currency Analyst*
The Australian dollar saw a drastic drop on Thursday, plunging below the key 0.6400 threshold against the US dollar as market sentiment took a hit and the greenback extended its recent gains. In this article, we’ll break down the main drivers behind AUD/USD’s decline, explore technical and fundamental perspectives impacting the pair, and outline potential risks and opportunities for traders moving forward.
### US Dollar Strength Amid Broad Risk-Off Mood
The US dollar is asserting dominance across major currency pairs, powered by robust economic data and an escalating risk-off mood in global markets. Several factors have supported the greenback’s ascent:
– **Stronger-than-expected US data**: The latest US jobless claims and retail sales figures have reinforced the outlook of economic resilience. Fewer Americans applied for unemployment benefits than forecast, while retail sales advanced, signaling steady consumer demand. Such data diminish the prospect of swift Federal Reserve rate cuts.
– **Rising Treasury yields**: A spike in US Treasury yields also contributed to the dollar’s strength. As yields on benchmark US 10-year notes climbed, dollar demand intensified, putting added pressure on risk-linked currencies like the Australian dollar.
– **Election uncertainty in Europe**: Political turbulence in France and the Eurozone ahead of elections is spurring investors toward safe haven assets, with the US dollar being the prime beneficiary.
### Australian Dollar Sinks: Confluence of Negative Factors
AUD/USD has been particularly susceptible to this risk aversion, with the pair dropping below the 0.6400 handle during Thursday’s North American trading session. The selloff in Australian assets extended beyond currencies, with the ASX 200 equity index also suffering losses.
The immediate drop in AUD/USD reflects a combination of:
– **Global risk aversion**: Equity markets in the US, Europe, and Australia all suffered sharp declines, prompting a broad flight to safety. The Australian dollar, as a high-beta currency, is especially sensitive to global risk sentiment.
– **Commodity price weakness**: Prices for iron ore and other key Australian exports faced renewed selling as traders braced for possible demand slowdowns in China and globally.
– **Reserve Bank of Australia’s limited hawkishness**: The RBA has not kept pace with rate hikes seen in the US Federal Reserve, eroding the yield differential and making the Aussie less attractive on a relative basis.
### Technical Analysis: AUD/USD Breaches Support
Technical developments have contributed to the selling momentum. Looking at the AUD/USD daily chart:
– **Key support area**: The 0.6400 region has acted as significant short-term support. Thursday’s decisive break below this level opens the door for further declines.
– **Downtrend confirmation**: AUD/USD is entrenched within a persistent downtrend, marked by lower lows and lower highs on both intraday and daily timeframes.
– **Moving averages**: The pair remains below major moving averages, such as the 50-day and 200-day simple moving averages, underlining bearish sentiment.
– **Oversold signals**: While some short-term technical indicators (like RSI) suggest oversold conditions, there is no immediate sign of reversal, as momentum favors sellers.
### Fundamental Backdrop – Australia vs. US
Breaking down the fundamental discrepancies influencing AUD/USD:
**Australian Side**
– **Economic data disappointment**: Recent Australian jobs figures missed expectations, with fewer new roles created and a slight rise in the unemployment rate. Wage growth is not accelerating rapidly enough to warrant aggressive tightening from the RBA.
– **RBA policy stance**: The Reserve Bank of Australia’s minutes and statements have spooked bulls, as policymakers remain cautious amid global uncertainties. While the RBA has not closed the door to further hikes, there is limited pressure to move quickly.
**US Side**
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