Ella 
In the Asian market on Monday, AUD/USD continued to trade sideways for the second consecutive day, fluctuating slightly around the 0.6400 mark. Meanwhile, AUD/USD has little reaction to the People’s Bank of China (PBoC) rate cut and remains near its lowest level since November 2022 hit last week.
In fact, the PBOC cut the one-year loan prime rate (LPR) to 3.45% from 3.55% previously, a cut of 10 basis points, less than the forecast of 15 basis points. In addition, the People’s Bank of China left the five-year prime loan rate unchanged at 4.20% amid concerns over a deepening crisis in China’s real estate sector. This, along with continued concerns over deteriorating conditions in the world’s second-largest economy, is bearish for ANZ currencies including the Australian dollar (AUD).
In addition, last Thursday’s disappointing employment data in Australia also confirmed that the Reserve Bank of Australia (RBA) will make another decision to keep interest rates unchanged in September. In addition, the maintenance of underlying bullish sentiment in the US dollar also restrained the trend of AUD/USD. Indeed, the U.S. dollar index (DXY), which tracks the greenback against a basket of currencies, was steady near its highest level since July 12 amid hawkish expectations from the Federal Reserve.
It is worth recalling that the minutes of the July 25-26 Fed meeting showed that policymakers continued to prioritize tackling inflation and left the door open for a 25 basis point increase in interest rates by the end of the year. This remains supportive of higher U.S. bond yields, which continues to support the dollar and put some pressure on AUD/USD. However, traders appear reluctant to place new bearish bets ahead of the Jackson Hole seminar later this week.
However, the aforementioned fundamental background suggests that AUD/USD has the least resistance to the downside. Therefore, with no major U.S. economic data to be released on Monday, the AUD/USD rally will fade quickly and may still be seen as a shorting opportunity.
