The AUD/USD continues to experience a downward slump, impacted heavily by the weakening outlook of the Chinese economy. As iron ore prices fall and mixed economic data from Australia emerge, the AUD/USD pair is struggling to find support.

Key Takeaways
Weak Chinese Economy: The Australian Dollar continues to decline due to weak economic data from China and falling iron ore prices.
Mixed Australian Data: Mixed economic data from Australia's Judo Bank PMI adds to the pressure on the AUD.
Federal Reserve Influence: Rising bets on a Fed rate cut in September provide temporary support for the AUD/USD pair.
Factors Driving the AUD/USD Slump
Weak Chinese Economy Exerts Pressure on AUD/USD
The Australian Dollar (AUD) continues to decline, heavily impacted by the weak economic outlook for China. The recent drop in iron ore prices, a crucial export commodity for Australia, further pressures the AUD/USD pair. With China being Australia's largest trading partner, any downturn in the Chinese economy has a direct negative impact on the Australian Dollar.
Mixed Economic Data from Australia Adds to AUD/USD Volatility
Australia's economic indicators have shown mixed results, contributing to the volatility of the AUD/USD pair. The Judo Bank Purchasing Managers Index (PMI) revealed a decline in the Composite PMI to 50.2 in July from 50.7 in June, marking the slowest growth in six months. This data reflects a slowing economy, which, combined with the weak Chinese economic outlook, has led to a continued decline in the AUD.
Potential Fed Rate Cut Provides Temporary Relief to AUD/USD
The US Dollar (USD) is under pressure due to rising bets on a Federal Reserve (Fed) rate cut in September. According to the CME Group’s FedWatch Tool, there is a 93.6% probability of a 25-basis point rate cut at the September Fed meeting. This potential rate cut has provided some temporary support for the AUD/USD pair, limiting its downside. However, the overall trend remains bearish due to the significant influence of China's economic conditions on the Australian Dollar.
Technical Analysis: AUD/USD Continues Bearish Trend
The daily chart analysis shows that the AUD/USD pair is depreciating within a descending channel, indicating a bearish bias. The 14-day Relative Strength Index (RSI) is below the level of 50, confirming a bearish trend. The AUD/USD pair is testing the lower boundary of the descending channel near the psychological level of 0.6600. A decline below this level could push the pair toward the throwback support around 0.6590.
On the upside, key resistance is at the nine-day Exponential Moving Average (EMA) at 0.6671, followed by the psychological level of 0.6700. A breakthrough above this level could lead the AUD/USD pair to test the upper boundary of the descending channel around 0.6722, and then aim for a six-month high of 0.6798.
Market Sentiment and Future Outlook
Market sentiment towards China plays a crucial role in determining the future direction of the AUD/USD pair. Given the strong correlation between the AUD/USD and Chinese economic indicators, any significant changes in China's economic outlook will likely impact the AUD. Investors should monitor key economic data releases from China and the US, as well as any updates on the Fed's monetary policy, to better understand the potential movements of the AUD/USD pair.
Overall, the bearish trend for the AUD/USD is expected to continue in the near term, driven by the weak Chinese economic outlook and mixed economic data from Australia. However, the potential Fed rate cut could provide some temporary relief and limit further downside for the pair.
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