- The Australian Dollar gains ground as the RBA is widely expected to hold a hawkish stance regarding its policy outlook.
- The AiG Industry Index eased in September, rising 4.9 points to -18.6 from -23.5 prior reading.
- The US Dollar receives support from the market caution amid rising Middle-East tensions.
The Australian Dollar (AUD) retraces its recent losses from the previous session against the US Dollar (USD) on Wednesday. The AUD receives support from the hawkish Reserve Bank of Australia (RBA) regarding its interest rate trajectory and Australia’s largest trading partner China’s stimulus measures.
The AiG Industry Index slightly improved in September, rising 4.9 points to -18.6 from the previous reading of -23.5, though it still signals contraction for the 29th consecutive month. Meanwhile, the AiG Manufacturing PMI continued its decline, falling 2.8 points to -33.6 from -30.8 prior, marking the lowest level in trend terms since the series began.
The upside of the AUD/USD pair could be restrained as the US Dollar receives support from the market caution amid rising geopolitical tensions in the Middle East. Iran launched over 200 ballistic missiles at Israel, prompting Prime Minister Benjamin Netanyahu to vow retaliation against Tehran for the Tuesday attack.
Daily Digest Market Movers: Australian Dollar advances as traders expect RBA to hold policy restrictive
- The CME FedWatch Tool indicates that markets are assigning a 63.1% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point cut is 36.9%, down from 58.2% a week ago.
- The US Dollar received downward pressure from the weaker-than-expected ISM Manufacturing PMI released on Tuesday. The index came at 47.2 for September, matching the reading with August’s print but came in below the market expectation of 47.5.
- The Australian Bureau of Statistics (ABS) reported the Retail Sales on Tuesday, the primary gauge of Australia’s consumer spending, which rose 0.7% month-over-month in August, exceeding the market expectations of a 0.4% increase.
- Federal Reserve (Fed) Chairman Jerome Powell said on Monday that the central bank is not in a hurry and will lower its benchmark rate ‘over time.’ Powell added that the recent half-point interest rate cut should not be seen as an indication of similarly aggressive future actions, noting that upcoming rate changes are likely to be more modest.
- China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) fell to 49.3 in September, indicating contraction, down from 50.4 in August. Meanwhile, China’s NBS Manufacturing PMI improved to 49.8 in September, up from 49.1 in the previous month and surpassing the market consensus of 49.5.
- St. Louis Federal Reserve President Alberto Musalem stated on Friday, according to the Financial Times, that the Fed should begin cutting interest rates “gradually” following a larger-than-usual half-point reduction at the September meeting. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying, “If that were the case, then a faster pace of rate reductions might be appropriate.”
- On Friday, the US Core Personal Consumption Expenditures (PCE) Price Index for August, increased by 0.1% MoM, falling short of the expected 0.2% rise, aligning with the Federal Reserve’s outlook that inflation is easing in the US economy. This has reinforced the possibility of an aggressive rate-cutting cycle by the Fed.
Technical Analysis: Australian Dollar grapples to remain above 0.6900 within the ascending channel
The AUD/USD pair trades near 0.6910 on Wednesday. A daily chart technical analysis shows that the pair is attempting to reintegrate into the ascending channel. This shows the bullish bias is in play. The 14-day Relative Strength Index (RSI) also remains above the 50 level, supporting the ongoing bullish sentiment.
In terms of resistance, a successful return to the ascending channel would reinforce the bullish bias and support the AUD/USD pair to aim for the area near the upper boundary of the channel, around the psychological level of 0.7000.
On the downside, the immediate support appears at the nine-day Exponential Moving Average (EMA) at the 0.6869 level. A break below this level could weaken the bullish bias and lead the AUD/USD pair to navigate the region around its seven-week low of 0.6622.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.01% | 0.26% | -0.10% | -0.45% | -0.48% | -0.05% | |
| EUR | 0.01% | -0.00% | 0.29% | -0.11% | -0.44% | -0.48% | -0.04% | |
| GBP | 0.01% | 0.00% | 0.27% | -0.12% | -0.44% | -0.48% | -0.04% | |
| JPY | -0.26% | -0.29% | -0.27% | -0.30% | -0.70% | -0.76% | -0.30% | |
| CAD | 0.10% | 0.11% | 0.12% | 0.30% | -0.35% | -0.39% | 0.06% | |
| AUD | 0.45% | 0.44% | 0.44% | 0.70% | 0.35% | -0.04% | 0.41% | |
| NZD | 0.48% | 0.48% | 0.48% | 0.76% | 0.39% | 0.04% | 0.45% | |
| CHF | 0.05% | 0.04% | 0.04% | 0.30% | -0.06% | -0.41% | -0.45% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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.
Source: https://www.fxstreet.com/news/australian-dollar-appreciates-despite-market-caution-rising-from-middle-east-tensions-202410020320