Forex world

November 22, 2023

Australian Dollar hovers above the major level

Australian Dollar faced challenges due to the modestly hawkish tone of FOMC minutes.

Australia’s Dollar could revisit three-month highs aligned with the 0.6600 psychological level.

Fed members agreed that policy should remain restrictive until inflation is going down toward the target.

The Australian Dollar (AUD) appears to be recovering some of the recent losses from the previous trading session. Following a corrective move by the US Dollar (USD) after the Federal Open Market Committee (FOMC) meeting minutes on Tuesday, the AUD/USD pair retreated from a three-month high.

Australia's dollar (AUD) saw upward support following the Reserve Bank of Australia (RBA) Governor Michele Bullock's remarks and the rather hawkish RBA meeting minutes from November. She said that Australia's labor market is doing well and the job trend can continue.

Governor Bullock adds that the inflation problem is a major concern for the next year or two since it is a result of underlying demand rather than just supply problems. She will speak again on Wednesday, but no surprises are expected.

According to the FOMC meeting minutes, members would consider tightening monetary policy further if "incoming information indicated that progress towards the Committee's inflation objective was insufficient." Policymakers also agreed that policy should remain restrictive for some time until inflation is clearly and sustainably going down towards the Committee's target.

The US Dollar Index (DXY) begins to retrace its recent gains, while US rates have stayed constant with a bearish tone. Investors await data from the United States (US) due on Wednesday, which includes weekly jobless claims, and the University of Michigan Consumer Sentiment survey.

Daily Digest Market Movers: Australian Dollar experiences strength on hawkish RBA tone

Australia’s Westpac Leading Index (MoM) for October contracted by 0.03% against the previous 0.07% rise.

RBA's meeting minutes revealed that the board acknowledged a "credible case" against an immediate rate hike but considered the case for tightening stronger due to increased inflation risks. The decision on further tightening would hinge on data and risk assessment.

RBA’s minutes also stressed the importance of preventing even a modest rise in inflation expectations. Board forecasts assumed one or two more rate rises, and rising house prices suggested policy might not be overly restrictive.

The People’s Bank of China (PBoC) kept its loan prime rate (LPR) unchanged at 3.45% as expected.

Chinese authorities are expected to take measures to support the real estate sector by drafting a list of 50 eligible developers, both private and state-owned. This list is expected to guide financial institutions in providing support through various means such as bank loans, debt, and equity financing.

US Existing Home Sales Change (MoM) for October declined by 4.1% as compared to the previous fall of 2.2%.

Technical Analysis: Australian Dollar remains above 0.6550, looks to revisit three-month highs

The Australian Dollar trades higher around the 0.6560 level on Wednesday. The AUD/USD pair may revisit the three-month high at 0.6589 aligned with the resistance area around the psychological level of 0.6600. On the downside, key support could be the major level at 0.6550, followed by the 23.6% Fibonacci retracement at 0.6514. If a break occurs below the level, the nine-day Exponential Moving Average (EMA) at 0.6505 could be the next support aligned with the major level at 0.6500.

AUD/USD: Daily Chart

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