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CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

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  • 18.03.2024 22:42
    AUD/USD creeps lower ahead of RBA’s decision, Fed meeting in focus
    • AUD/USD sees slight decline as markets gear up for the Reserve Bank of Australia's upcoming rate decision.
    • US Treasury yields rise, boosting the Dollar, as anticipation builds for the Federal Reserve's policy announcement.
    • The RBA is expected to hold rates unchanged amid mixed opinions among economists on the central bank's first rate cut.

    The Australian Dollar begins the Asian session, clocking minuscule losses of 0.02% against the US Dollar as market participants prepare for the Reserve Bank of Australia (RBA) monetary policy decision. On Monday, the AUD/USD was virtually flat, though at the time of writing, it trades at 0.6559, down 0.01%.

    Upbeat sentiment could shift amidst major central bank decisions

    Wall Street finished Monday’s session in the green. US Treasury yields edged higher as investors await the Federal Reserve’s monetary policy decision, with the 10-year note benchmark up at 4.328%. Consequently, the Greenback advances 0.13%, as measured by the US Dollar Index (DXY) at 103.58.

    On Monday, the US economic docket was light, with the release of the National Association of Home Builders (NAHB) Market Index for February, which improved the most since July 2023, rising by 51, up from 48 in February. The NAHG Chairman Carl Harris noted “Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year.”

    Aside from this, the day's main theme is the RBA’s decision. Market players estimate the central bank would keep rates unchanged thought, there are different opinions amongst economists. Some expect the RBA will lower rates in November, while others estimate the first cut will be in September.

    Given the backdrop of the Aussie economy printing mixed figures on inflation, and growth slowed to 1.5% in Q4 2023 from 2.1%, that has opened the door for easing policy. Testifying before the Australian Parliament last month, Bullock said that “inflation is being persistent, particularly in services. But it is coming down.”

    ANZ Bank analysts estimate the RBA would keep a “mild tightening bias, with no change in rates. While the January labor force survey came in weak, we think the RBA (like us) is expecting payback in the February data.”

    AUD/USD Price Analysis: Technical outlook

    If the RBA surprises the markets with a dovish tilt, the AUD/USD can drop further below the 200-day moving average (DMA at 0.6557, exposing the 0.6500 mark. Further losses are seen at the March 5 low of 0.6477, followed by the February 13 swing low of 0.6442. On the other hand, the pair could aim higher if the RBA sticks to a hawkish message and might recoup the 0.6600 mark. The next resistance level is seen at January’s 5 cycle low, which turned resistance at 0.6640.

     

    RBA FAQs

    The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

    While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

    Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

    Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

    Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

     

  • 18.03.2024 15:59
    RBA Preview: Three scenarios and their implications for AUD/USD – TDS

    Economists at TD Securities discuss the Reserve Bank of Australia (RBA) Interest Rate Decision and their implications for the AUD/USD pair.

    Dovish: (5%)

    The Bank would need to change guidance and remove its soft tightening bias. But the RBA does not have the data to back a dovish shift. Also, markets and central banks are pushing back on imminent rate cuts so why would the RBA turn dovish? AUD/USD -0.8%.

    Base Case: Neutral (75%)

    With GDP in line with RBA expectations and signs of sticky inflation offshore, the Bank has no pressing need to change the script. Guidance therefore should remain unchanged with the Bank reiterating: 1) Inflation is moderating but remains high; 2) The outlook is uncertain, and 3) Returning inflation to target is the priority. AUD/USD +0.2%.

    Hawkish: (20%)

    The Bank has already indicated it may need to tighten further. After softening its hawkish bias last month vs Dec'23, we see no compelling argument for the Bank to turn more hawkish again. AUD/USD +0.6%.

     

  • 18.03.2024 13:13
    AUD/USD edges higher after positive Chinese data
    • AUD/USD rises after the release of better-than-expected macroeconomic data from China, its largest trading partner. 
    • Risk from China’s property sector, however, continues to undermine Iron Ore, Australia’s largest export. 
    • The week promises volatility as both Australia and US’s central banks hold policy meetings.
       

    AUD/USD is edging higher, trading in the 0.6570s on Monday, after the release of strong Chinese data showed higher-than-expected growth in Industrial Production, Retail Sales and Fixed Asset Investment, in February. 

    The data improves the outlook for Australia’s largest trading partner but is not enough to provide an antidote to China’s property sector woes. Construction is also more influential for the Australian Dollar (AUD) because Chinese property developers are the primary buyers of Australian Iron Ore, which they use to make the steel for large-scale construction projects. 

    These woes are reflected in a continued plunge in Iron Ore prices which have fallen from over $140.00 per tonne at the start of 2024 to around $102.50 at the time of publication. Iron Ore is Australia’s largest export and a fall in price translates into a decline in demand for the Australian Dollar (AUD) which is needed to purchase it. 

    AUD/USD could see volatility in major week for central banks

    Monday sees the start of an important week for AUD/USD in which both the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed) are scheduled to hold policy meetings, with significant implications for the exchange rate. 

    The RBA will announce the outcome of its meeting on Tuesday at 03:30 GMT. Although inflation in Australia has made good progress – falling from 5.4% to 4.1% in February –  it is still far from the RBA’s target and no change in the cash rate is expected. There is a chance, however, that the bank may remove wording about the need for a further interest rate hike from the accompanying statement, according to analysts at Commerzbank, which could benefit the Australian Dollar (and AUD/USD). 

    The Fed is set to announce its decision at 18:00 on Wednesday, and likewise no change in the Fed Funds Rate is predicted. Recent stickier-than-expected inflation, however, suggests the possibility the Fed’s Summary of Economic Projections (SEP) may change how many interest-rate cuts members foresee in 2024. 

    In the last SEP in December, policymakers expected there to be three 0.25% cuts in 2024, however, analysts at Bloomberg expect a possibility that could fall to two in the new dot plot. Such a change would be bullish for USD (negative for AUD/USD).

     

  • 18.03.2024 08:58
    AUD/USD maintains position near 0.6570, focus on the RBA decision
    • AUD/USD holds ground ahead of RBA’s policy decision on Monday.
    • Chinese Retail Sales (YoY) rose by 5.5% in February, compared to the expected 5.2% and 7.4% prior.
    • The correction in US Treasury yields contributes to downward pressure on the US Dollar.

    AUD/USD snaps its two-day losing streak, advancing to near 0.6570 during the European session on Monday. The pair found upward support as the US Dollar (USD) retreated amid lower US Treasury yields. However, caution prevails among market participants ahead of the Reserve Bank of Australia's (RBA) policy decision scheduled for Tuesday.

    The US Dollar Index (DXY) is hovering around 103.40, with the 2-year and 10-year US Treasury yields at 4.71% and 4.29%, respectively, by the press time. On Friday, increases in US yields, were driven by a hawkish sentiment surrounding the Federal Reserve. The Fed is anticipated to uphold its elevated interest rates at Wednesday’s meeting in response to recent inflationary pressures.

    The Australian Dollar (AUD) might have received upward support as the S&P/ASX 200 Index recovered from its losses, although the Australian equity market faced challenges during Asian hours due to softer commodity prices.

    According to Bloomberg, Westpac anticipates the Reserve Bank of Australia to maintain its cash rate at 4.35% at Tuesday's meeting. RBA Governor Michele Bullock recently highlighted that inflation in Australia is primarily "homegrown" and "demand-driven," attributed to the strength of the labor market and increasing wage inflation. The RBA does not foresee this phenomenon occurring until 2026.

    Additionally, investors also await interest rate decisions from both the People's Bank of China (PBoC). Chinese Retail Sales (YoY) increased by 5.5% in February, surpassing expectations of 5.2% and the previous reading of 7.4%. Additionally, Chinese Industrial Production (YoY) rose by 7.0%, compared to the market expectation of a 5.0% figure in February and the previous reading of 6.8%.

    AUD/USD

    Overview
    Today last price 0.6572
    Today Daily Change 0.0011
    Today Daily Change % 0.17
    Today daily open 0.6561
     
    Trends
    Daily SMA20 0.6559
    Daily SMA50 0.6569
    Daily SMA100 0.6586
    Daily SMA200 0.6561
     
    Levels
    Previous Daily High 0.6584
    Previous Daily Low 0.6552
    Previous Weekly High 0.6639
    Previous Weekly Low 0.6552
    Previous Monthly High 0.661
    Previous Monthly Low 0.6443
    Daily Fibonacci 38.2% 0.6564
    Daily Fibonacci 61.8% 0.6572
    Daily Pivot Point S1 0.6548
    Daily Pivot Point S2 0.6534
    Daily Pivot Point S3 0.6516
    Daily Pivot Point R1 0.658
    Daily Pivot Point R2 0.6598
    Daily Pivot Point R3 0.6612

     

     

  • 17.03.2024 23:13
    AUD/USD remains on the defensive above the mid-0.6500s, all eyes on RBA, Fed rate decision
    • AUD/USD loses ground near 0.6560 in Monday’s early Asian session. 
    • The RBA is anticipated to leave its key interest rate unchanged at 4.35% on Tuesday. 
    • The US FOMC is likely to hold its benchmark rate at its March meeting on Wednesday as inflation remains elevated.

    The AUD/USD pair trades on a negative note above the mid-0.6500s during the early Asian session on Monday. Markets are likely to trade quietly ahead of the Reserve Bank of Australia (RBA) and the US Federal Open Market Committee (FOMC) interest rate decisions on Tuesday and Wednesday, respectively. The major pair currently trades around 0.6560, down 0.01% on the day. 

    The RBA is expected to hold its key interest rate at 4.35% for a third consecutive meeting at its March meeting scheduled for Tuesday. Furthermore, investors anticipate the Australian central bank to retain a mild tightening bias and see at least two rate cuts in the final quarter of 2024. The timing of RBA easing may depend on when the US Federal Reserve (Fed) begins cutting rates, which is estimated in the June meeting. However, any surprise dovish remarks from the RBA after the policy meeting might drag the Australian Dollar (AUD) lower against the US Dollar (USD).

    On the other hand, the Fed is likely to maintain its monetary policy at its March meeting amid the uptick in inflation in the US. The Fed Chairman Jerome Powell warned in recent weeks about cutting interest rates too early and emphasized a “data-dependent” approach to ensure inflation returns to the 2% target firmly. 

    On Friday, the preliminary US University of Michigan Consumer Sentiment Index eased to 76.5 in March from 76.9 in February, weaker than the market expectation of 76.9. Additionally, the one-year and five-year inflation expectations were unchanged at 3.0% and 2.9%, respectively.

    Looking ahead, the RBA will announce its interest rate decision on Tuesday, while the Fed will announce it on Wednesday. Traders will take cues from these events and find trading opportunities around the AUD/USD pair.

    AUD/USD

    Overview
    Today last price 0.656
    Today Daily Change -0.0001
    Today Daily Change % -0.02
    Today daily open 0.6561
     
    Trends
    Daily SMA20 0.6559
    Daily SMA50 0.6569
    Daily SMA100 0.6586
    Daily SMA200 0.6561
     
    Levels
    Previous Daily High 0.6584
    Previous Daily Low 0.6552
    Previous Weekly High 0.6639
    Previous Weekly Low 0.6552
    Previous Monthly High 0.661
    Previous Monthly Low 0.6443
    Daily Fibonacci 38.2% 0.6564
    Daily Fibonacci 61.8% 0.6572
    Daily Pivot Point S1 0.6548
    Daily Pivot Point S2 0.6534
    Daily Pivot Point S3 0.6516
    Daily Pivot Point R1 0.658
    Daily Pivot Point R2 0.6598
    Daily Pivot Point R3 0.6612

     

     

  • 15.03.2024 20:02
    AUD/USD stuck on the low end of near-term losses as Friday markets flatline
    • AUD/USD cycles just north of 0.6550.
    • Little Aussie data to chew on leaves AUD/USD in the lurch.
    • Next week: double-header showings from RBA and Fed.

    The AUD/USD is churning just above 0.6550 as markets prepare for next week’s double feature from the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed). Both central banks are broadly expected to hold interest rates steady as investors focus on when rate cuts will come. According to the CME’s FedWatch Tool, money markets were recently thrown a curve ball, and bets of a June rate cut from the Fed have eased to 60%, down from 70% at the start of the week.

    Next week also brings Australia’s latest labor and employment figures on Thursday, and median market forecasts expect Australia’s Employment Change in February to add 30K new jobs, while the Unemployment Rate is forecast to tick down to 4.0% from 4.1%. Preliminary Judo Bank Australian Purchasing Managers Index (PMI) figures for February are also scheduled for early Thursday.

    Broader markets will be focusing full-bore on next Wednesday’s Fed rate statement, where the US central bank is also expected to update the Fed Dot Plot summary of interest rate expectations. The near-term end of the Dot Plot curve is expected to tick up to 5.5% from the current 4.6%. With markets pinning hopes on at least three 25 basis point rate cuts from the Fed in 2024, investor sentiment has been at odds with the Fed’s own rate outlook for the entire year. The Fed projected three rate cuts through 2024, while money markets priced in an eye-watering six or seven rate cuts through the year totaling nearly 200 basis points in rate trims for the year.

    As the US economy continues to churn at a healthy clip and inflation remains stubbornly sticky, markets have had little choice but to slash rate cut expectations, and rate futures traders are half-heartedly hoping for a June rate cut.

    AUD/USD technical outlook

    AUD/USD spent most of the trading week on the low side, backsliding into the 200-hour Simple Moving Average (SMA) near 0.6580 on Thursday. The 50-hour and 200-hour SMAs have begun a bearish crossover near 0.6585 as intraday price action tilts into the bearish side. The Aussie-Dollar pair flubbed a brief bullish push into the 0.6640 early in the week.

    Friday’s third of a percent decline has the Aussie clattering into the 200-day SMA against the US Dollar near 0.6560, and momentum is tilted into bear country as the pair fails to find bullish momentum after a rebound from the last swing low into the 0.6450 handle.

    AUD/USD hourly chart

    AUD/USD daily chart

    AUD/USD

    Overview
    Today last price 0.6561
    Today Daily Change -0.0020
    Today Daily Change % -0.30
    Today daily open 0.6581
     
    Trends
    Daily SMA20 0.6557
    Daily SMA50 0.6572
    Daily SMA100 0.6584
    Daily SMA200 0.6562
     
    Levels
    Previous Daily High 0.6632
    Previous Daily Low 0.657
    Previous Weekly High 0.6667
    Previous Weekly Low 0.6478
    Previous Monthly High 0.661
    Previous Monthly Low 0.6443
    Daily Fibonacci 38.2% 0.6593
    Daily Fibonacci 61.8% 0.6608
    Daily Pivot Point S1 0.6556
    Daily Pivot Point S2 0.6532
    Daily Pivot Point S3 0.6494
    Daily Pivot Point R1 0.6619
    Daily Pivot Point R2 0.6656
    Daily Pivot Point R3 0.6681

     

     

  • 15.03.2024 13:00
    AUD/USD extends downside after negative Chinese data
    • The Australian Dollar is hit by negative Chinese House Price data on Friday. 
    • A fall in Chinese New Loans and M2 Money Supply add to the narrative of constraint. 
    • AUD/USD tumbled on Thursday after US data showed inflationary tendencies in the US economy.

    AUD/USD is trading almost two tenths of a percent lower on Friday, extending Thursday’s sell-off into the weekend. The pair is feeling pressure from negative Chinese housing and lending data which indicates the property sector of the world’s second largest economy is still in the eye of the storm. 

    The weak Chinese data is a negative factor for the Australian Dollar which relies heavily on the Chinese market for its exports, particularly Iron Ore, which is Australia’s largest export commodity. 

    The Chinese House Price Index showed a decline in house prices of minus 1.4% in February from minus 0.7% in the previous month of January, according to data from the National Bureau of Statistics of China, released early Friday. This continues the down trend in Chinese house prices since 2019.

    Chinese property market woes have had a direct impact on Iron Ore prices, because the country uses so much of the ore to make the steel girders it uses in its buildings. Iron Ore prices have registered a roughly 25% drop since the start of 2024 alone. 

    Other data out on Friday showed an unexpected fall in New Loans in China, in February. New Loans shrank to ㍐1,450 billion, according to data from The People’s Bank of China (Pboc). This was a decline from the 4,920 billion Yuan in January and below estimates of 1,500 billion. The data indicates less lending, which could be growth limiting, especially for the borrowing intensive property sector. 

    Data showing lower-than-expected Money Supply M2, which increased by 8.7% YoY in February versus the 8.8% forecast, suggests a brake on liquidity. 

    US factory gate inflation rises  

    AUD/USD fell over half a percent on Thursday after the release of US macroeconomic data indicated the US economy was hotter-than-expected. 

    The US Producer Price Index, which measures factory-gate price inflation, rose to 1.6%, easily beating the 1.1% expected and 1.0% previous, suggesting continued inflationary tendencies. 

    Core PPI also rose by more than estimated. The data suggests the inflation will be passed on to consumers and turn up later to bug shoppers in the Consumer Price Index.

    The higher inflation makes it less likely the Federal Reserve (Fed) will be in a hurry to cut interest rates. Whilst market expectations continue to see the probabilities favor a rate cut in June, the chance of a reduction in May has dwindled to virtually zero. 

    Higher interest rates for longer are positive for USD because they attract more foreign capital inflows. They are negative for the AUD/USD which measures the number of Australian Dollars purchasable with one US Dollar. As such the data was negative for the pair, which declined substantially after the release on Thursday.

     

  • 14.03.2024 21:58
    AUD/USD Price Analysis: Consolidation is on the horizon as hourly indicators reach oversold conditions
    • The daily RSI remains in positive territory but took a big hit.
    • The hourly chart shows strong selling pressure with RSI sitting in oversold territory.
    • The pair may consolidate in the short term.

    The AUD/USD pair is currently trading at 0.6583, suggesting a noticeable and strong downturn. Regardless of the immediate selling pressure, the broad technical outlook indicates that buyers maintain significant control over the pair. The hourly chart shows strengthening short-term bearish momentum but the selling traction may lose steam after indicators enter in oversold territory.

    On the daily chart, the Relative Strength Index (RSI), despite a slight decline, is still in the positive range. The green bars in the Moving Average Convergence Divergence (MACD) show a stable positive momentum, further confirming the dominance of buyers on the larger timeframes.

    AUD/USD daily chart

    While the daily chart displays evidence of buying momentum, the latest RSI readings on the hourly chart present a contrasting picture with values well below 30. This implies that the AUD/USD is in oversold territory, suggesting an overwhelming dominance of sellers in the market. However, the MACD shows decreasing red bars, indicating a waning bearish momentum in the short term as the sellers might be running out of gas.

    AUD/USD hourly chart

    Despite the bearish momentum on the hourly chart, the broader outlook remains bullish as the pair continues to trend above the 100 and 200-day SMAs. As for now, the buyers are battling to defend the 20-day average, which in case of losing, will tilt the outlook in favor of the bears for the short term.

     

     

  • 14.03.2024 12:15
    AUD/USD trades marginally higher ahead of macroeconomic data
    • AUD/USD rises ahead of key US data that could impact the pair. 
    • US Producer Prices and Retail Sales are on the docket on Thursday. 
    • The RBA’s relatively hawkish stance is a supporting factor for the pair. 

    AUD/USD is trading in the 0.6600s on Thursday, up three hundredths of a percent in the European session, as traders await key macroeconomic data that could impact the pair.

    Both US factory gate prices, or Producer Prices, and US Retail Sales are scheduled for release at 12:30 GMT. They may impact the outlook for inflation and tone the debate around when the Federal Reserve is expected to cut interest rates. 

    The Producer Price Index ex Food and Energy (Core PPI), is an important inflation metric, economists expect a drop to 1.9% YoY registered in February from 2.0% in January. On a monthly basis, Core PPI is forecast to rise 0.2% versus the 0.5% advance seen in the previous month. 

    The headline Producer Price Index (PPI) is forecast to show a 1.1% YoY gain versus 0.9% in January, and a 0.3% gain MoM, the same as previous. 

    US Retail Sales is forecast to rebound in February, registering a 0.8% rise against the 0.8% decline in January. Higher-than-expected sales tend to spur inflation with hawkish implications for interest rate policy and a bullish impact on USD (bearish for AUD/USD).

    Technical Analysis: AUD/USD in long-term downtrend

    AUD/USD is in a long-term downtrend, producing lower highs and lower lows. 

    Australian Dollar vs. US Dollar: Weekly chart


    The AUD/USD has just pushed back after touching a major trendline and there is a risk it could fall further, in line with the longer-term downtrend. 

    A break below the last swing low of October 2023 at 0.6442 would solidify the bearish outlook and probably see prices ease further to around the 0.6170 October 2022 lows. 

    Alternatively, a break above the 0.6871 December 2023 high would indicate the long-term trend was probably reversing and the Australian Dollar might be set for a climb to sunnier slopes.

     

  • 13.03.2024 16:44
    AUD/USD rises on RBA’s relatively hawkish stance
    • AUD/USD rises as markets continue to expect the Fed to cut rates in June. 
    • The RBA by contrast is striking a more hawkish tone, suggesting rates may even need to rise. 
    • Iron Ore prices are a drag on AUD/USD as they tumble amidst China property slump. 

    AUD/USD is trading in the lower 0.6600s on Wednesday during the US session. It is marginally up by two tenths of a percent on the day as markets continue to expect the Federal Reserve (Fed) to cut interest rates in June, despite stickier inflation data. Lower interest rates are negative for USD since they mean less foreign capital inflows. This contrasts with the Reserve Bank of Australia (RBA) which may still hike. 

    From a technical perspective AUD/USD has stalled after rallying up and hitting key resistance from a long-term trendline. Overall the outlook remains bearish as the pair is in a long-term downtrend, producing lower highs and lower lows. 

    Australian Dollar vs. US Dollar: Weekly chart

    Despite recent gains, the mood music around the Australian Dollar remains negative due mainly to the steep fall in price of Australia’s largest export commodity, Iron Ore, which has dropped by over 20% since the start of 2024. 

    Iron Ore Prices in USD

    The decline has been driven by a fall in demand from its biggest export partner China, which is using less iron to make steel for its beleaguered property sector. 

    Usually the Chinese government comes to the rescue when the economy takes a turn for the worse – not this time. At a meeting of the Chinese National People’s Congress on Monday, the party decided to withhold a bailout for the indebted property industry. 

    Instead, China’s Communist Party seemed more interested in punishing the property magnates behind the $7.5 trillion market’s collapse, according to news.com.au.

    “Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law. They will be made to pay the due price,” said Minister of Housing and Urban-Rural Development Ni Hong at the weekend.

    This does not bode well for Iron Ore prices going forward or for the Australian Dollar. 

    Reserve Bank of Australia split on interest rates 

    Unlike the Federal Reserve, which is steadily reaching a consensus on the need for a June interest rate cut, the Reserve Bank of Australia (RBA) continues hinting it may have to raise rates even higher than their current 4.35% level. 

    Inflation in Australia fell more than expected – from 5.4% to 4.1% in Q4 of 2023, but it remains well above the RBA’s target range of 2%-3%. RBA Governor Michelle Bullock stated recently that inflation in Australia is mostly “homegrown” and “demand driven”, due to the strength of the labor market and rising wage inflation. This suggests it is more entrenched than in other countries, and will take longer to fall back to target. Indeed, the RBA does not see this happening till 2026 and Bullock hinted the RBA might still need to raise interest rates to tackle inflation. 

    On Wednesday, ex RBA Governor Philip Lowe said there is a two way risk on interest rates, and that the current RBA Governor Michelle Bullock was right to issue a warning that interest rates might still need to go higher.  

    The contrast in central bank policy stances suggests the US Dollar may actually weaken versus the Aussie, neutralizing some of the risks to the currency from the fall in demand for Australian Iron Ore. 

    Downtrend to continue?

    The AUD/USD has just pushed back after touching a major trendline and there is a risk it could fall further, in line with the long-term downtrend. 

    A break below the last swing low of October 2023 at 0.6442 would solidify the bearish outlook and probably see prices ease further to around the 0.6170 October 2022 lows. 

    Alternatively, a break above the 0.6871 December 2023 high would indicate the long-term trend was probably reversing and the Australian Dollar might be set for sunnier slopes.

     

  • 13.03.2024 08:52
    AUD/USD exhibits strength above 0.6600 as market sentiment improves
    • AUD/USD demonstrates firm footing above 0.660 amid a slightly upbeat market mood.
    • The Fed could revise projections for the number of rate cuts this year due to stubborn inflation data.
    • Sticky inflation may keep RBA interest rates higher for a longer period.

    The AUD/USD pair is up 0.13%, near 0.6615, at the time of writing in the European session on Wednesday. The Aussie asset moves higher as the US Dollar remains sideways, even though the February United States Consumer Price Index (CPI) data has prompted uncertainty over Federal Reserve (Fed) rate cuts in the June policy meeting.

    S&P500 futures posted some gains in the London session, indicating a higher risk appetite among market participants. 10-year US Treasury yields fell to 4.14%. The US Dollar Index (DXY) is stuck in a tight range, slightly below 103.00, as investors reassess the likelihood of three rate cuts this year, as projected by the Fed in December.

    Fed policymakers are expected to hold interest rates until they are convinced that inflation will sustainably fall to the desired rate of 2%. The consumer price inflation data released for the first two months of 2024 have not indicated signs of easing, which could force Fed policymakers to reassess their expectations for three rate cuts.

    On the contrary, Fed Chair Jerome Powell said in his Congressional testimony last week that the central bank is not far from gaining conviction that inflation will return to 2%.

    Meanwhile, the Australian Dollar is likely to dance to the tunes of market expectations for the Reserve Bank of Australia’s (RBA) interest rate decision, scheduled for next week. The RBA is expected to keep the Official Cash Rate (OCR) steady at 4.35%. Former RBA Governor Philip Lowe said in an interview with 9 Australia on Tuesday that stubborn inflation could force policymakers to keep interest rates higher for a longer period than what was anticipated earlier.

     

  • 12.03.2024 23:12
    AUD/USD dips amid US inflation report, as Fed rate cut expectations recalibrate
    • AUD/USD trends lower after US inflation data prompts rethink on Federal Reserve's easing timeline.
    • February’s CPI report at 3.2% YoY fuels US Dollar strength, overshadowing Australian business sentiment.
    • Traders recalibrate rate cut expectations, with focus shifting to upcoming US retail sales data for further cues.

    The Australian Dollar printed back-to-back negative days during the week against the US Dollar, courtesy of a warm inflation report in the United States (US) that justified the Federal Reserve’s stance to be patient in cutting borrowing costs. On Tuesday, the AUD/USD was down 0.11%, and as the Wednesday Asian session commences, it trades virtually unchanged at 0.6606.

    Aussie Dollar on the defensive as US CPI surpasses forecasts, Fed rate cut estimates adjust

    The US Bureau of Labor Statistics (BLS) revealed that February’s inflation was slightly higher than expected. The Consumer Price Index (CPI) in February exceeded estimates of 3.1% YoY as inflation printed 3.2% and above January’s 3.1%. Underlying inflation, as measured by the core CPI, stood at 3.8% YoY, down from 3.9%, but missed the consensus of 3.7%.

    After the data, the AUD/USD extended its losses as US Treasury bond yields rose, underpinning the Greenback. The US Dollar Index (DXY), a gauge of the buck’s value against a basket of peers, gained 0.18%, up at 102.92, with buyers shy of reclaiming the 103.00 mark.

    Following the US data release, the CME FedWatch Tool shows traders increased their bets for a 25-basis-point rate cut in June, down from 72% a day ago to 68%.

    The Aussie’s economic docket on Tuesday featured NAB Business Conditions for February. Conditions improved from 6.0 to 10.0, while Business Confidence deteriorated from 1.0 to 0.0.

    Ahead of the week, the Australian economic docket is empty, while in the US, it is not. US Retail Sales for February are expected to rise by 0.8% MoM, and the control group (used to calculate the Gross Domestic Product) at 0.4% MoM

    AUD/USD Price Analysis: Technical outlook

    The AUD/USD registered two straight sessions with lower closes, suggesting that sellers gathered momentum, but the Relative Strength Index (RSI) indicator shows another story. As the pair extended its losses, the RSI is flat, while the 100-day moving average (DMA) crossed four days ago above the 200-DMA.

    That said, the DMAs are in perfectly bullish order, which could signal that buyers are in charge. Nevertheless, they must reclaim the March 12 high at 0.6638 so they can challenge the March 8 cycle high at 0.6667. Further upside is seen at 0.6700. On the other hand, if sellers drag the AUD/USD below 0.6600, further downside is seen, with the confluence of the 50 and the 100-DMA at 0.6573/75 seen as first support, followed by the 200-DMA at 0.6560.

     

    Australian Dollar FAQs

    One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

    The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

    China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

    Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

    The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

     

  • 12.03.2024 14:34
    AUD/USD retreats to 0.6600 on hot US Inflation data
    • AUD/USD falls sharply to 0.6600 as US Dollar rises after stubborn US inflation data.
    • The hot US inflation report has dented market expectations for Fed rate cuts in the June meeting.
    • RBA Hunter warned about the deepening cost-of-living crisis.

    The AUD/USD pair falls to the round-level support of 0.6600 as the hotter-than-expectations United States Consumer Price Index (CPI) data for February has dented appeal for antipodeans. The Aussie asset weakens as stubborn US inflation data has improved the appeal for the US Dollar.

    The appeal for risk-perceived currencies has dampened as investors rush for safe-haven assets. The US Dollar Index (DXY) delivers a V-shape recovery to 103.30 as expectations that the Federal Reserve (Fed) will reduce interest rates in the June meeting could wane. 10-year US Treasury yields have climbed to near 4.15%.

    The hot inflation data is expected to increase uncertainty over Fed rate cuts. Last week, Fed Chair Jerome Powell said in his Congressional testimony that it would be inappropriate to start lowering interest rates before gaining conviction that inflation will sustainably return to the 2% target. Powell also said that the central bank is not far from gaining that conviction, but the inflation data for February tells a different story.

    Going forward, market participants will shift focus to the US Producer Price Index, (PPI) and monthly Retail Sales data for February, which will be published on Thursday.

    On the Australian front, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said, “For some households, interest rate hikes are also challenging and difficult, but inflation is the single biggest drag,” at the Australian Financial Review business summit in Sydney in Tuesday’s Asian session, reported by Bloomberg.

    Next week, the RBA will announce the monetary policy decision in which policymakers are expected to keep the Official Cash Rate (OCR) unchanged at 4.35%.

     

  • 11.03.2024 23:11
    AUD/USD faces slight drop amid US inflation data anticipation
    • AUD/USD slightly down in early Asian trading, reflecting Monday's cautious market mood.
    • US inflation expectations set for Tuesday's release, with forecasts suggesting varied changes in CPI figures.
    • Australian economic outlook to be clarified with upcoming consumer and business confidence polls, alongside building permits data.

    The AUD/USD begins Tuesday’s Asian session with minuscule losses, following Monday’s -0.19% performance on a risk-off impulse as traders brace for the release of US inflation data. At the time of writing, the pair exchanges hands at 0.6612, with losses of 0.02%.

    Aussie Dollar’s await domestic and US inflation data

    Wall Street ended Monday’s session with losses. Data-wise, the US New York Fed Inflation expectations report for one year was anchored at 3%, unchanged from the previous reading. On Tuesday, the US Bureau of Labor Statistics (BLS) is expected to reveal that inflation in February stood at 3.1% in yearly figures, while monthly figures would aim high from 0.3% to 0.4%. The Core Consumer Price Index (CPI) is expected to drop in annual and monthly data, at 3.7% from 3.9% and 0.3% from 0.4%.

    If the data comes higher than expected, that can pave the way for further AUD/USD downside, as traders would trim bets that the US Federal Reserve would ease policy as soon as June. Otherwise, that could open the door for discussions at the May meeting.

    On Australia’s front is the ANZ Consumer Confidence Poll and the NAB Business Confidence for February are going to be released. After those two polls, traders await Building Permits data for January, which is expected to improve from -10.1% to -1%.

    AUD/USD Price Analysis: Technical outlook

    The AUD/USD has printed back-to-back bearish candles that could be forming an ‘evening star’ chart pattern that could open the door for a pullback. If sellers drag the exchange rate below 0.6600, that could open the door toward the 50-day moving average (DMA) at 0.6576, ahead of the 100-DMA at 0.6572. Further losses are seen below the 200-DMA at 0.6560, exposing the 0.6500 mark. On the other hand, traders need to conquer the March 11 high at 0.6627 before challenging 0.667, March 8’s high.

    Australian Dollar FAQs

    One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

    The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

    China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

    Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

    The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

     

  • 11.03.2024 14:26
    AUD/USD Price Analysis: Tumbles to 0.6600 as uncertainty deepens ahead of US Inflation
    • AUD/USD falls sharply to 0.6600 as safe-haven appeal improves ahead of US Inflation data.
    • The USD Index rebounds to 102.90 even though the Fed rate-cut expectations remain firm.
    • RBA Hunter is expected to provide GDP projections at Australia’s Financial Review's Business Summit on Tuesday.

    The AUD/USD pair faces a sharp sell-off and drops to the round-level support of 0.6600 in the early New York session on Monday. The Aussie asset tumbles as uncertainty ahead of the United States Consumer Price Index (CPI) data for February has dented risk appetite of the market participants.

    The monthly headline inflation is forecasted to have risen by 0.4% against a 0.3% increase in January. The core CPI that excludes volatile food and energy prices is expected to have grown at a slower pace of 0.3% from 0.4%. For annual figures, economists expect that the headline CPI remains sticky at 3.1% and the core inflation decelerates to 3.7% from 3.9% in January.

    Considering negative overnight futures, the S&P 500 is expected to open on a negative note. The US Dollar Index (DXY) rebounds to 102.90 though market expectations for the Federal Reserve (Fed) reducing interest rates in the June policy meeting remain firm. The CME FedWatch tool shows a 72% chance for a rate-cut decision in June.

    Meanwhile, the next move in the Australian Dollar will be guided by the Australia’s Financial Review's Business Summit, scheduled for Tuesday. Reserve Bank of Australia’s (RBA) recently appointed chief economist, Sarah Hunter, is expected to deliver Gross Domestic Product (GDP) projections and the economic risks.

    AUD/USD drops after failing to deliver a decisive break above the horizontal resistance of the Ascending Triangle pattern formed on a daily timeframe, which is plotted from the January 24 high at 0.6621. The upward-sloping border of the chart pattern is placed from the February 13 low at 0.6319.

    The triangle could break out in either direction. However, the odds marginally favor a move in the direction of the trend before the formation of the triangle – in this case, up. A decisive break above or below the triangle boundary lines would indicate a breakout is underway.

    The 14-period Relative Strength Index (RSI) falls back into the 40.00-60.00 region, which indicates persistent indecisiveness among investors.

    Shorts buildups for the Aussie asset may swell if it breaks below February 20 high at 0.6579. This would drag the asset towards February 26 low at 0.6530, followed by the psychological support of 0.6500.

    On the contrary, the Australian Dollar will strengthen if the asset climbs above December 4 high at 0.6688. This would drive the pair towards January 11 high at 0.6728 and January 4 high at 0.6760.

    AUD/USD daily chart

     

     

  • 11.03.2024 09:00
    AUD/USD flirts with daily low around 0.6600 on softer risk tone, downside seems limited
    • AUD/USD kicks off the new week on a weaker note in reaction to mixed Chinese inflation figures.
    • A softer risk tone also undermines the Aussie, though subdued USD demand lends some support.
    • Traders might also prefer to wait on the sidelines ahead of the crucial US CPI report on Tuesday.

    The AUD/USD pair extends Friday's retracement slide from the 0.6665-0.6670 region, or its highest level since mid-January and remains under some selling pressure on the first day of a new week. Spot prices remain on the defensive through the first half of the European session and currently trade just above the 0.6600 round-figure mark, though any meaningful corrective slide seems elusive.

    Mixed Chinese inflation figures released over the weekend failed to ease concerns about deflation, which, along with US-Sino trade tensions, turn out to be key factors undermining the China-proxy Australian Dollar (AUD). In fact, China’s Consumer Price Index (CPI) rose for the first time in four months, while the Producer Price Index slipped by the 2.7% YoY rate during the reported month. Adding to this, Bloomberg reported that Washington is weighing sanctions on several Chinese tech companies, which, along with a generally weaker tone around the equity markets, undermines the risk-sensitive Aussie.

    The US Dollar (USD), on the other hand, struggles to attract any meaningful buyers or build on Friday's recovery from its lowest level since mid-February amid bets for an imminent shift in the Federal Reserve's (Fed) policy stance. Market participants now seem convinced that the US central bank will start cutting interest rates in June and the expectations were reaffirmed by a spike in the US jobless rate. This keeps the yield on the benchmark 10-year US government bond depressed near a more than one-month low, which keeps the USD bulls on the defensive and should lend some support to the AUD/USD pair.

    Traders might also refrain from placing aggressive directional bets and prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due for release on Tuesday. The crucial US CPI report will play a key role in influencing expectations about the Fed's rate-cut path, which, in turn, will drive the USD demand and provide some meaningful impetus to the AUD/USD pair. In the meantime, spot prices remain at the mercy of the USD price dynamics and the broader risk sentiment in the absence of any relevant market-moving economic releases from the US on Monday.
     

     

  • 10.03.2024 23:08
    AUD/USD loses ground above the 0.6600 mark amid modest rebound in US Dollar
    • AUD/USD trades on a weaker note near 0.6620 in Monday’s early Asian session. 
    • US Nonfarm payrolls increased by 275K in February; Unemployment Rate rose more than expected to 3.9%.
    • Chinese CPI rose for the first time in six months, coming in at 0.7% YoY in February vs. -0.8% prior. 

    The AUD/USD pair trades with a mild negative bias above the 0.6600 psychological mark during the early Asian session on Monday. The pair edges lower due to the modest rebound of the US Dollar (USD) to 102.75 after retreating to 102.40. Investors will closely watch the US Consumer Price Index (CPI) and Retail Sales data this week for fresh impetus. At press time, AUD/USD is trading at 0.6620, unchanged for the day. 

    The US Nonfarm Payrolls rose by 275K in February from 229K in January, better than the expectation of 200K. Meanwhile, Average Hourly Earnings arrived at 4.3% YoY, below the estimation and the previous reading of 4.4%. The Unemployment Rate climbed to 3.9% from 3.7% in January. 
     
    The Federal Reserve Chair Jerome Powell said last week during his semiannual testimony that the labor market is relatively tight, but supply and demand conditions have continued to come into better balance. The markets believe that the Fed will need more data to be confident that the supply of labor is recovering. According to the CME FedWatch Tool, traders have nearly fully priced a June rate cut and almost 100 basis points (bps) by year-end.

    On the other hand, the Chinese Consumer Price Index (CPI) climbed for the first time in six months due to spending linked to the Lunar New Year. China rose 0.7% YoY in February from a 0.8% decline in January, above the market consensus of a 0.3% increase, the first monthly rise since August 2023. The Producer Price Index (PPI) fell 2.7% YoY in February, compared to expectations and the previous January’s reading of a 2.5% decline. The Chinese CPI inflation data provides some relief to the world's second-largest economy and lifts the China-proxy Australian Dollar (AUD). 

    Looking ahead, market players will keep an eye on the US February CPI and Retail Sales on Tuesday and Thursday this week, respectively. On the Aussie docket, the Westpac Consumer Confidence for March will be due on Tuesday. These events could give a clear direction to the AUD/USD pair. 

     

  • 08.03.2024 14:00
    AUD/USD climbs higher amid mixed US jobs data, lower US yields
    • Australian Dollar rises and marks its third consecutive day of gains.
    • US Nonfarm Payrolls outperform expectations at 275K, but rising unemployment and lower wage growth hint at a cooling job market.
    • AUD/USD's rally supported by dipping US 10-year Treasury yields and a weakening Dollar Index, amid global monetary policy recalibrations.

    The Australian Dollar advanced for the third straight trading day, early in the North American session, edges up 0.35% and exchanges hands at 0.6654.

    Aussie Dollar’s strengthens as US Dollar extends its weekly losses

    Recently released data by the US Department of Labor revealed the US Nonfarm Payrolls for February exceeded estimates of 200K, came at 275K, and was higher than January’s downward revised 353K reading to 229K. Further data underscored that the jobs market is cooling as the Unemployment Rate increased from 3.7% to 3.9%, while Average Hourly Earnings edged lower in monthly and annual figures.

    The AUD/USD extended its rally toward a daily high of 0.6664, while US Treasury bond yields edged lower. The US 10-year benchmark note rate is down to 4.044%, the lowest level since February 2.

    At the same time, the US Dollar Index (DXY) is tumbling 0.25%, sitting at 102.52, threatening to drop to an eight-week low.

    New York Fed Williams: Neutral interest rates “still quite low”

    Earlier, the New York Fed President John Williams said the restrictive monetary stance has cooled demand, adding that the Fed is responsible for achieving price stability. He said the Fed doesn’t consider politics in deliberations and stated the economy in 2023 was remarkable.

    Aside from this, Australian data revealed during the week showed a surplus in the Trade Balance, while the economy grew 0.2% QoQ in Q4 2023, below estimates of 0.3%. On a yearly basis, the economy expanded 1.5% YoY, above estimates but shy of the previous reading of 2.1%.

    AUD/USD Price Analysis: Technical outlook

    The AUD/USD sitting above the 0.6600 figure, has opened the door for further upside, as confirmed by Relative Strength Index (RSI) studies at bullish territory. If buyers extend the rally toward 0.6700, that could open the door for testing the January 5 high at 0.6747, before challenging the 0.6800 mark. On the other hand, a pullback below the January 5 low of 0.6640, could exacerbate a test of the 0.6600 figure.

     

  • 08.03.2024 12:56
    AUD/USD: Scope for a move to 0.7000 on a 12-month horizon – Rabobank

    AUD/USD is testing the water above the 0.6600 level for the first time since early February. Economists at Rabobank analyze the pair’s outlook.

    Potential for further dips back to 0.6500 in the one-to-three-month horizon

    The Aussie should continue to draw support from a relatively hawkish central bank and, compared with various other major economies, a strong set of fundamentals which include both a balanced budget and positive current account position.

    We see scope for AUD/USD to move to 0.7000 on a 12-month horizon. That said, we also see the potential for further dips back to 0.6500 in the one-to-three-month horizon on further bouts of USD strength.

     

  • 07.03.2024 20:46
    AUD/USD soars as Powell signal cuts, eyes on US NFP
    • AUD/USD climbs above 0.6600, rallying 0.82% after Powell hints at upcoming Fed rate adjustments.
    • ECB's resistance to early easing contrasts with Powell's openness to rate cuts based on inflation trends.
    • US labor market shows resilience with steady unemployment claims; trade deficit widens more than expected.

    The Australian Dollar rallied against the US Dollar in late trading on Thursday after Fed Chair Jerome Powell's second day of testimony before the US Congress. The AUD/USD trades above the 0.6600 figure, posting gains of 0.82% as investors look for the Fed’s first rate cut.

    AUD/USD strengthens amid Fed’s rate cut speculations

    The financial markets' narrative revolves around when the major central banks will cut rates. On Thursday, the European Central Bank (ECB) pushed back against easing in April, sticking to its data dependence and noted that it would have more data to assess the appropriate restrictiveness of monetary policy in June.

    Meanwhile, Fed Chair Jerome Powell reiterated the US central bank stance, suggesting they would begin to cut borrowing costs at some point in the year. Nevertheless, he added that it would depend on the inflation path, moving sustainably towards the Fed’s 2% goal.

    Regarding the labor market, which, according to Powell, remains robust, the number of Americans filling for unemployment claims rose by 217,000, unchanged from the previous week, an exceeded estimate of 215,000.

    Other data showed that the US trade deficit widened from $-64.2 billion to $-67.4 billion, exceeding forecasts, according to the US Department of Commerce.

    What to watch?

    The Australian economic docket is empty. In the US, February’s Nonfarm Payrolls are expected to drop from 353K to 200K, in tune with the ongoing economic slowdown. The Unemployment Rate is expected to remain unchanged at 3.7%.

    AUD/USD Price Analysis: Technical outlook

    the AUD/USD has risen more than 1.50% during the last two days, clearing key resistance levels on its way up. For a bullish continuation, buyers need to reclaim the January 5 low-turned resistance at 0.6640, ahead of challenging 0.6650. Further upside is seen at 0.6747, the January 5 high. On the other hand, if sellers push prices below 0.6600, look for a correction towards the confluence of the 100 and 200-day moving averages (DMAs) at 0.6560/65.

    Australian Dollar FAQs

    One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

    The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

    China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

    Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

    The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

     

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