Ella 
AUD/USD fell to its lowest level since November 2022 on the first trading day of the week, but managed to recover a few points into the European session. The spot price is currently trading around the 0.6480 area, still down more than 0.25% within the day, and it is still easy to continue the decline in the past month.
Global risk sentiment took a nosedive on Monday amid growing concerns over deteriorating economic conditions in China. The fears were heightened after one of China’s largest developers, Country Garden, warned of a massive $7.6 billion loss in the first half of 2023. That, along with geopolitical risks, has dampened investors’ appetite for riskier assets, as evidenced by a broad sell-off in Asian stock markets, and has been a key factor in moving funds away from the risk-sensitive Australian dollar.
In fact, a Russian warship fired warning shots at a cargo ship it said was bound for Ukraine in the southwestern Black Sea on Sunday. It will be recalled that Russia withdrew from a UN-brokered deal in July to allow Ukraine to transport grain through the Black Sea, warning that any ships bound for Ukraine would be considered likely to be armed. This, along with expectations that the Federal Reserve will keep interest rates higher for longer, boosted the safe-haven U.S. dollar (USD) and weighed on the Australian dollar (AUD/USD) pair.
Markets appear to believe the Fed will stick to its hawkish stance to tame inflation and have been pricing in another rate hike by the end of the year. The bet was confirmed by U.S. macro data on Friday, which showed producer price inflation rose slightly more than expected in July. Against the backdrop of a modest rise in consumer prices in July, the data suggested the Fed was far from successful in getting inflation back to its 2 percent target. That opens the door for the Fed to hike rates by 25 basis points in November.
At the same time, hawkish Fed expectations still support high U.S. bond yields and continue to support the dollar. However, hopes of China expanding its stimulus measures prevented traders from building new bearish bets on AUD/USD and limited further losses. However, the fundamentals appear to be clearly in favor of bearish traders, with the path of least resistance for spot prices to the downside. So any subsequent rally could still be seen as a short selling opportunity and remain blocked.
