Why Is the Australian Dollar Struggling? | Key Factors Behind AUD's Decline

Australian Dollar Faces Fourth Consecutive Session of Losses

The Litecoin USDAustralian Dollar (AUD) remains under pressure during Friday's trading session, marking its fourth straight day of decline against the US Dollar (USD). This downward movement appears driven by growing risk aversion among investors, particularly following the release of unexpectedly strong US economic indicators.

Key Drivers Behind AUD's Weakness

Several fundamental factors are contributing to the Australian Dollar's current struggles:

• US PMI data surprised to the upside, showing stronger economic activity than analysts anticipated
• Federal Reserve policymakers have expressed concerns about persistent inflation
• Australian inflation expectations declined to their lowest level since October 2021
• Commodity prices face downward pressure amid changing interest rate expectations

The Reserve Bank of Australia's latest meeting minutes revealed ongoing uncertainty about future cash rate adjustments, leaving market participants without clear directional guidance.

Technical Perspective on AUD/USD

From a chart analysis standpoint, the AUD/USD pair currently hovers around the psychologically significant 0.6600 level. Technical indicators suggest:

• The pair has broken below the lower boundary of its recent rising wedge pattern
• The 14-day Relative Strength Index sits precisely at the 50 midpoint
• Immediate resistance appears at the 9-day EMA near 0.6630

Market technicians will be watching the 0.6550 support level closely, as a break below could open the door for further declines toward 0.6470.

Macroeconomic Crosscurrents

While Australian private sector activity continues expanding for the fourth consecutive month, the pace of growth shows signs of moderation. The services sector maintains expansion but at a slower rate, while manufacturing conditions persist in contraction territory.

Geopolitical developments in the Asia-Pacific region, particularly involving China, could introduce additional volatility to the Australian Dollar given the close economic ties between the two nations.

Comparative Currency Performance

Among major currencies, the Australian Dollar has shown particular weakness against the Canadian Dollar in recent trading. The USD broadly strengthened following the PMI data release, though its gains have been somewhat uneven across currency pairs.

As markets continue to digest the implications of potentially higher-for-longer US interest rates, the Australian Dollar's sensitivity to risk sentiment and commodity prices leaves it vulnerable to further downside in the current environment.