AUD Slumps Below 0.6959 Amid Sharp Trade Surplus Contraction

The Australian Dollar (AUD) has declined below 0.6959 due to a sharp contraction in Australia's trade surplus. Despite exports rising by 3.7% month-over-month (MoM) in August, imports climbed by 5.8% MoM in the same period.

This reduction in the trade surplus has contributed to the AUD's decline. Additionally, signs of softer inflation in the US have reduced expectations for an immediate Federal Reserve rate hike, which could weigh on the Greenback and benefit the AUD.

Commerzbank's Volkmar Baur cautions that the impact of past RBA tightening is still working its way through the economy, noting that interest rate hikes take time to effect and are particularly slow in affecting the real estate market. Building permits fell by 6.1% compared to the previous month, and prices in major cities continue to decline.

The technical analysis suggests that the AUD/USD pair is bearish in the near term, with spot below the 100-day simple moving average (SMA) and the Bollinger middle band. The Relative Strength Index (14) at 26.8 sits in oversold territory, indicating stretched but not yet reversed downside momentum.