By the end of this week, the AUD/USD pair lost 1.41% value due to downbeat market sentiment. The major drag on the pair is the economic developments inside China which have dented the mood of the investors.
In addition, the yields on global bonds are also showing signs of more tightening. That's why it makes sense for the Australian Dollar (AUD) to experience downside pressure in the last week. On Friday (the last day of the trading week), the AUD/USD closed near 0.6401 with a loss of 0.02%.
China's Economy Facing A Slowdown
In the last 2 weeks, the data coming out of China paints a troubled picture of the economy. For starters, weak retail sales data, along with a plunge in imports/exports, tells us that not everything is good. In addition, business activity in China has also stalled, which is denting the sentiment.
But the biggest news of all is the Evergrande bankruptcy that was initiated in New York, USA. Considering the sheer size of the Evergrande and its role in the Chinese economy, it makes sense for the investors to feel anxious.
At the same time, the Fed meeting minutes tell us that inflation remains the number one target. In fact, many members have hinted at more tightening, which means the end of rate hikes or a rate cut isn't going to happen this year.
With this backdrop, it appears that the focus of the AUD/USD will now be on the next week's economic docket. We have the S&P Global PMIs, durable goods orders, Fed speakers, Powell's speech, housing data, and so on. Some of these events have the ability to influence the AUD/USD in a major way during the next week.
On the technical front, the AUD/USD pair seems to be favoring a downtrend. Although the pair didn't close below 0.6386 (low of 10th Nov), the chances of a rebound are still very slim.
That's why there's a high chance that the AUD/USD pair will try to retest the 0.6400 level again along with the test of 0.6343.