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• AUD saw a marginal recovery on Friday but was one of the worst-performing G10 currencies.
• Falling commodity prices and Chinese economic woes weighed on the Aussie.
• The USD remains steady after mixed PCE figures.

In Friday's session, the Australian Dollar (AUD) slightly recovered against the USD, as AUD/USD rebounded to 0.65515 due to corrective activities after intensive sell-offs in the previous sessions. The continual weakness in China's economy paired with depreciating iron ore prices remain the significant contributor to the AUD's dynamic performance.

Despite the visible vulnerability in the Australian economy, the Reserve Bank of Australia (RBA) delays its rate cuts due to persistently high inflation. This stance could potentially limit further depreciation of the AUD. As per current forecasts, the RBA might be one of the last among the G10 central banks to implement rate cuts, a condition that could extend the AUD's gains.

Daily digest market movers: Aussie sees marginal recovery, amidst continuing economic stress in China and Australia
 

• AUD/USD has remained firmly rooted in the 'risk-off' sentiment, dominated by concerns over the Chinese economy and the AUD's 'high risk' G10 status.
• At the start of this week, the People’s Bank of China (PBoC) decided to cut rates, sparking fears about the health of the second-largest economy in the world, Australia’s primary trading partner.
• Additionally, Industrial metals prices remained under pressure due to lingering fears of weak Chinese demand.
• The Reserve Bank of Australia (RBA) remains hawkish, and markets bet on a potential rate hike in Q4, which mirrors the nearly 50% odds on either a September or November rate hike.

AUD/USD Technical analysis: Bearish outlook endures with the pair resting below main SMAs
 

The AUD/USD movement below the 20,100 and 200-day Simple Moving Averages (SMAs) still signals a significant area of concern, suggesting that the downward trends might continue and the downward shifts seen in July weren’t just corrective.

Key support levels line up at 0.6540, 0.6530, and 0.6500, while resistance levels lie at 0.6600 (ie., the 200-day SMA), 0.6610, and 0.6630.

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