**AUD/USD Weekly Forecast: Strong Dollar Pressures Aussie, Markets Look to RBA for Cues**
*Original reporting by Yohay Elam, Forex Crunch. Expanded and updated with additional analysis.*
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The Australian Dollar (AUD), paired against the US Dollar (USD), continues to face downward pressure as a robust US currency and persistent uncertainty in global markets dominate the scene. As traders and investors prepare for the upcoming Reserve Bank of Australia (RBA) meeting, several factors shape the short- and medium-term outlook for the AUD/USD.
### Dollar Strength Remains a Key Factor
The US Dollar Index (DXY) has been on a sustained rally, as investors flock to the greenback for its safe-haven appeal. The recent strength is largely attributed to several interlinked factors:
– **Resilient US economic data:** The broad US economy continues to outperform expectations, especially in the labor market and retail sales.
– **Sticky inflation:** US inflation remains above the Federal Reserve’s 2% target, prompting Fed members to maintain a cautious tone regarding policy easing.
– **Global risk aversion:** Ongoing concerns about slower global growth, geopolitical tensions in Europe and the Middle East, and a volatile equity market have increased demand for US assets.
As a direct result, the AUD/USD pair has broken below key technical support levels, with market participants wary of further downside.
### Australian Dollar: Domestic Influences and Global Headwinds
The Australian dollar is heavily exposed to shifts in global risk appetite. Its status as a commodity-linked currency amplifies the impact of international developments, while domestic factors continue to play a nuanced role.
#### Main Domestic Influences
– **RBA policy stance:** While the Reserve Bank of Australia has maintained a more dovish approach in comparison to the Fed, strong labor market indicators and sticky underlying inflation have sparked debate about the prospect of further rate hikes or a prolonged pause.
– **Consumer spending:** Data suggests that Australian consumers remain cautious. Retail sales have stagnated amid high interest rates and cost-of-living pressures.
– **Housing market:** Australian home prices have shown pockets of strength, yet affordability concerns and rising mortgage rates loom as risks to economic growth.
#### Key Global Headwinds
– **Chinese demand:** As China is Australia’s largest trading partner, any slowdown in the Chinese economy, particularly within its real estate sector, impacts Australian exports and, consequently, the currency.
– **Falling commodity prices:** Recent declines in iron ore and other export commodities have created additional pressure.
### What About the RBA?
Anticipation hangs over the RBA’s upcoming meeting. With US monetary policy already pricing in a “higher for longer” stance, the underlying question revolves around whether the Australian central bank will signal more aggressive action or maintain its current approach.
#### What Markets are Watching:
– **Official interest rate decision and policy statement:** Any change in language regarding inflation persistence or labor market strength could move markets.
– **Summary of economic forecasts:** Revisions to growth
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