In terms of the outlook for AUD/USD, we have been bearish in recent articles the AUD has fallen but there is far more downside to come in our view...

This week the RBA held interest rates and it looks like the hiking cycle has ended:

The Interest Rate Outlook

“The Reserve Bank of Australia kept its cash rate unchanged at 4.1% during its August meeting, extending the rate pause for the second successive month and defying market consensus of a 25bps rate hike. While highlighting that cost pressure in the country is easing, the central bank viewed that inflation at the level of 6% was still too high. The board reiterated that some further monetary tightening may be needed to ensure inflation returns to the target range of between 2 to 3% in a reasonable timeframe.” ( TRADING ECONOMICS)

If inflation is too high why didn't they raise rates? They dont want to because they know the economy is slowing and want to buy time because the global economy is slowing and commodity prices are falling which will weigh on the economy.

The USD has a better yield and also is more insulated against the slow up in the global economy:

“Factories in Asia reported sluggish demand in July as new domestic and global orders slumped at the start of the third quarter, underscoring the lingering weak momentum in the global economy. Six out of the nine private surveys released Tuesday showed that manufacturing activity in Asia’s major producers again contracted in July. The reading for China unexpectedly slipped into contraction for the first time in three months.” (CNBC)

Asia is slowing and China is looking at a recession in the near future as we pointed out in an article earlier in the week – this slow up will hit commodity prices and this will send the AUD and all commodity currencies down against the USD over the longer term.

Slow Up in the Global Economy Bearish for the AUD

A few charts on the slow up in the global economy and China Australia's major trading partner. Global manufacturing has turned down:

"The threat of global recession in the second half of 2023 has returned, as July Sales Managers Survey shows..." (WORLD ECONOMICS)

China is moving into deflation which points to a recession coming...

Iron Ore

The biggest export of Australia is starting to fall as demand in China dries up and we could target recent lows at 83.50.

The big fundamentals favor more AUD weakness and speculators are heavily long risk currencies and short the USD which points to a move down to monthly support.

Technical Analysis

Our view of AUD/USD and the key levels of support and resistance to look out for are on the daily and monthly charts below: