Forex world

November 09, 2023

Australian Dollar holds ground above major level

- Australian Dollar looks to snap a three-day losing streak.

- Australia’s central bank made a dovish rate statement; weighing on AUD.

- Investors adopt a cautious stance as Fed officials resist the notion of lowering interest rates.

The Australian Dollar (AUD) attempts to snap a three-day losing streak on the subdued US Dollar (USD), which could be attributed to the downbeat US Treasury yields. However, the AUD/USD pair experienced downward pressure following a dovish rate statement by the Reserve Bank of Australia (RBA) post the policy decision.

Australia’s central bank opts for a data-dependent strategy in response to the persistent challenges posed by inflation and a slowing Australian economy. This approach was underscored by the RBA's decision on Tuesday to raise the Official Cash Rate (OCR) from 4.10% to a 12-year high of 4.35%. The move was a direct response to the latest revealed inflation data, indicating a notable monthly increase of 5.6%.

The AUD/USD pair confronts challenges amid a tepid market atmosphere this week, with investors awaiting fresh cues before making any moves, especially in light of the upcoming US Federal Reserve (Fed) decision in December.

Cautious sentiment prevails as Fed officials resist the idea of lowering interest rates. Investors will likely focus on the upcoming weekly US Jobless Claims report for potential market impact. Additionally, market participants anticipate insights from Federal Reserve Chair Jerome Powell, who is scheduled to participate in a panel discussion later in the day, focusing on "Monetary Challenges in a Global Economy."

Daily Digest Market Movers: Australian Dollar attempts to halt the losing streak on the downbeat Greenback

- The RBA has resumed policy tightening, raising the Official Cash Rate (OCR) from 4.10% to 4.35% after maintaining the benchmark interest rate unchanged for four consecutive meetings.

- Australia’s TD Securities Inflation (YoY) fell to 5.1% in September from 5.7% prior.

- Australia’s Retail Sales grew 0.2% in the third quarter after contracting by 0.6% in the previous quarter.

- Economists at the National Australia Bank (NAB) anticipate another 25 basis points hike in February following the Q4 inflation data. Additionally, NAB believes that rate cuts are unlikely to commence until November 2024.

- China's Consumer Price Index (CPI) witnessed an annual decline of 0.2% in October, compared to the expected 0.1% decrease. The monthly CPI dropped by 0.1%, contrasting with the earlier 0.2% growth.

- Pan Gongsheng, the Governor of the People's Bank of China (PBOC), expressed optimism in a statement on Wednesday, saying that China's economy is on a positive trajectory and that it is anticipated to achieve the 5% growth target successfully.

Additionally, the International Monetary Fund (IMF) has adjusted its outlook for China's Gross Domestic Product (GDP) growth, now projecting a 5.4% growth rate in 2023, up from the initial forecast of 5.0%, and 4.6% in 2024, surpassing the previous estimate of 4.2%.

- Fed Governor Michelle Bowman reinforced the opinion that the US Fed is contemplating future increases in short-term interest rates. Moreover, Neil Kashkari, President of the Minnesota Fed, questioned about whether the central bank had raised rates sufficiently. Kashkari cited the economy's resilience as a factor influencing his perspective.

- The US Bureau of Labor Statistics recently unveiled the Nonfarm Payrolls (NFP) data for October, disclosing a figure of a 150K increase in jobs. This missed the expected 180K and marked a substantial drop from September's 297K.

Technical Analysis: Australian Dollar hovers around 0.6400 aligned with 21-day EMA

The Australian Dollar hovers around the major support at 0.6400 psychological level on Thursday, with the additional backing of the 21-day Exponential Moving Average (EMA) at 0.6394. A decisive breach below the latter could propel the AUD/USD pair towards a descent, targeting the November low at 0.6318. On the upside, the immediate resistance is the 23.6% Fibonacci retracement at 0.6417, followed by the psychological level at 0.6500 aligned with the 38.2% Fibonacci retracement level at 0.6508.

AUD/USD: Daily Chart

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