The Australian dollar shrinks gains against the US dollar, but the outlook remains negative

After meeting resistance above 0.7300 on Thursday (October 7), the Australian dollar against the US dollar reduced its gains in the European market, despite the rebound in market risk appetite.


The latest round of decline in the Australian dollar may be related to the overall slight rebound of the US dollar. The alleviation of the energy crisis, the progress of the US debt ceiling issue, and market optimism have all restricted attempts to hedge the dollar upwards.

On the other hand, the Australian dollar continued to look for support from the recent surge in natural gas prices, and US natural gas prices soared by 40% on Wednesday. Australia is a net exporter of natural gas and a major exporter of liquefied natural gas (LNG) in the world.

Later, the market will pay attention to the number of initial jobless claims in the United States to seek further hints from Friday's non-agricultural employment data, especially after the strong ADP employment data almost confirms that the Fed will begin to reduce the scale of debt purchases in November. Traders are also waiting for Friday's Reserve Bank of Australia (RBA) monetary policy statement.

AUD/USD technical outlook

Karen Jones, head of fixed income technical analysis at Commerzbank, said that as long as the exchange rate is below the 0.7370 area, the outlook for the Australian dollar against the US dollar is expected to remain negative.

Karen Jones said that the recent strength of the Australian dollar against the US dollar is seen as a corrective rebound. The market’s recent upward move is constrained by the 4-month downward trend line at 0.7370, and we will retain the negative bias. Initial resistance is located at the 50-day moving average of 0.7307.

We expect the Australian dollar to fall to the August low of 0.7106. The key support level remains at 0.7062/0.6991. This represents the lows of September and November 2020. A break below 0.6991 will trigger a further fall to the 0.6760 50% Fibonacci retracement level of the 2020-2021 volatility.

(Australian dollar against the dollar daily chart)

At 18:47 GMT+8, the Australian dollar was quoted at 0.7289 against the US dollar.