The Australian dollar remains vulnerable to a drop below 0.6500 against its U.S. counterpart as key drivers of the pair continue to weigh on sentiment.
The AUD is a commodity currency and with the global growth outlook growing gloomier by the day, it is difficult to envision the likes of iron ore, copper and gold heading back to the highs made in the first half of 2022.
The AUD is also a risk-sensitive currency with a strong correlation to equity markets. Recent price action in key markets such as the S&P 500 suggests the strong gains between mid-June and mid-August were a bear market correction.
Analysts are closely watching the 3,900 level in the S&P 500 - a sustained break would increase the chances of bearish moves into year-end.
Central bank expectations will likely be a negative influence on the AUD/USD in the months ahead. Reserve Bank of Australia Governor Philip Lowe may use a speech on Thursday to hint that the pace of tightening is set to slow after four straight 50 basis-point rate hikes, as the cash rate nears a 'neutral' setting nL1N30D087.
If there is such a hint, it will contrast with the unambiguously hawkish message from the Federal Reserve atthe Jackson Hole symposium nL1N30219A.
The AUD/USD is poised to test the 2022 low at 0.6682; a clear break below targets the 61.8 Fibonacci retracement of the pandemic low-high at 0.6463.
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