**AUD/USD Retreats from Previous Highs as Upward Momentum Weakens: Market Analysis and Outlook**
*Adapted and expanded from the original article by Econotimes, with additional market context.*
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The Australian dollar (AUD) faced renewed selling pressure against the US dollar (USD) on Thursday, reversing earlier gains as bullish momentum faded. This development reflects changing dynamics in both domestic and global economies, heightened risk aversion, and shifting expectations surrounding monetary policy.
This analysis delves into the recent performance of the AUD/USD pair, examines the factors influencing the currency move, and provides insights into potential future developments. Additional information from recent forex market commentary and Reserve Bank of Australia (RBA) communications is included to give broader context.
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## Recent AUD/USD Performance: Technical Overview
– After rallying to a two-week high in the previous session, AUD/USD showed signs of exhaustion above 0.6670, failing to extend gains further.
– As of Thursday’s early Asian trading, the pair tumbled back toward the 0.6630 region, initiating a corrective phase after its recent uptrend.
– Four-hour and daily charts reflected declining momentum, with key resistance established around 0.6675 and support forming near 0.6620 and 0.6590.
– Technical indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggested overbought conditions. This led traders to lock in profits and triggered a minor wave of selling.
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## Key Factors Behind the AUD/USD Decline
Several variables contributed to the downturn in the Australian dollar against its US counterpart:
### 1. **Shifting Risk Sentiment**
– Global equity markets reversed direction after a strong run, as investors grew cautious about slowing economic growth and persistent inflation.
– Appetite for risk-sensitive currencies like the AUD decreased as safe-haven demand for the USD rose.
– Geopolitical tensions in Asia and ongoing concerns about China’s economic recovery exerted further pressure on the AUD, given Australia’s trade dependence on China.
### 2. **RBA Policy Expectations**
– The Reserve Bank of Australia kept its policy rate unchanged at its most recent meeting, signaling that further tightening would be contingent on upcoming economic data.
– Recent Australian economic figures have been mixed. Inflation has moderated but remains above target, and labor market indicators pointed to a plateau in job growth.
– Money markets reflected a reduced probability of additional rate hikes in 2024, making the AUD less attractive compared to higher-yielding or more secure alternatives.
### 3. **US Economic Resilience and the Fed**
– Stronger-than-expected US data continued to underpin the USD. Economic growth remained solid, and some inflation metrics rebounded.
– The Federal Reserve maintained a relatively hawkish tone in recent comments, stressing its commitment to controlling inflation before considering rate cuts.
– Differentials in interest rate
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