- China’s upward movement of the yuan contributed to a weaker dollar.
- China’s central bank set the midpoint of the yuan’s trading range at its strongest level since August 7.
- Investors even started lowering prices as early as March.
In the realm of AUD/USD price analysis, there was a commendable bounce in the Australian dollar on Tuesday, triggered by the announcement of China’s currency adjustment. This significant event has injected a distinctly bullish sentiment into the current AUD/USD market valuation.
At the same time, China’s upward trend in the yuan contributed to a weaker dollar ahead of the Federal Reserve meeting. However, analysts warn that the dollar’s downward momentum may be limited.
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China’s central bank set the midpoint of the yuan’s trading range at its strongest level since August 7. As a result, the yuan hit a near four-month high of 7.1301 against the dollar. At the same time, the Australian dollar rose by 0.4%, reaching a three-month high. National Australia Bank strategist Rodrigo Cutril in Sydney noted that China’s strong currency peg and a Bloomberg News report on support for the property sector boosted market sentiment.
Catril said: “It encourages the market to think, ‘OK, great, we’ve seen the worst of CNI weakness.’ Furthermore, they are telling us that they want lower dollar/CNH.” According to Bloomberg News, Chinese regulators are compiling a list of 50 developers eligible for funding.
Meanwhile, minutes from Australia’s November policy meeting revealed the central bank’s concern that inflation expectations could become entrenched if it does not raise interest rates.
Elsewhere, investors’ attention will focus on the latest minutes from the Federal Reserve meeting to gauge the direction of interest rates. Traders have almost fully priced in the likelihood that the Fed will keep interest rates unchanged in December. What’s more, some even started lowering prices as early as March.
AUD/USD key events today
- Minutes from the Fed meeting
- Existing US Home Sales Report
AUD/USD Technical Price Analysis: Bearish Divergence
The Aussie is rising towards the 0.6600 resistance level. The bulls advanced when the price broke above the strong resistance level of 0.6525. However, the RSI shows weaker bullish momentum even when the price is rising. There is a bearish divergence indicating exhaustion in the bullish move.
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Therefore, the bulls may have to pause and retest the key 0.6525 level before the uptrend resumes. However, the uptrend will only continue if the price holds above the 30-SMA and the RSI remains above 50.
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