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In Wednesday's session, the AUD/USD traded neutral but remained vulnerable below 0.6400. On the one hand, strong economic activity reports from the US strengthened the USD, while the AUD struggled to gain momentum after Tuesday's Reserve Bank of Australia (RBA) decision.

ISM Services PMI lived up to the expectations in August. The figure came in at 54.5, higher than the expected figure of 52.5 and above the previous 52.7. Regarding the Fed, Beige’s book, which reports on the US's current economic situation through interviews with key business contacts and economists gathered by each of the 12 Federal Reserve Districts, revealed that economic growth was “modest” and job growth “subdued” in July and August. However, it also stated that imbalances persisted with the availability of skilled workers and the number of applicants constrained.

Meanwhile, US bond yields jumped back to weekly highs and depicted that markets are gearing up for another Federal Reserve hike (Fed) hike, which would lift rates to 5.75%. According to the CME FedWatch tool, the odds of a 25 basis point (bps) increase in November rose above 40%, making the USD gain interest. It's worth highlighting that the Fed stated that it needs to see the economy “cooling” to end its tightening cycle, to strong economic figures fuel hawkish bets for the remainder of the year.

On the AUD’s side, it is struggling to gather momentum after the Reserve Bank of Australia (RBA) held interest steady at 4.10% on Tuesday, adopted a wait-and-see approach and didn’t commit to further hikes.

AUD/USD Levels to watch 

The AUD/USD daily chart analysis points to a bearish outlook for the short term. The Relative Strength Index (RSI) is situated below its midline in negative territory, displaying a southward trajectory. Likewise, the Moving Average Convergence Divergence (MACD) reveals lower green bars, signifying a growing bearish momentum for the pair. Furthermore, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), implying that the bears retain control on a broader scale.

Support levels:0.6360, 0.6350, 0.6330.

Resistance levels: 0.6400, 0.6440 (20-day SMA), 0.6470.

AUD/USD Daily Chart

(Click on image to enlarge)

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