Australian Dollar falls as US Dollar remains solid due to less-dovish Fed
|- The Australian Dollar depreciates as the US Dollar remains solid following recent data.
- The Aussie Dollar may regain its ground due to the hawkish RBA’s policy outlook.
- The US Dollar gained ground due to the increased likelihood of a less dovish stance by the Fed in November.
The Australian Dollar (AUD) continues its decline for the second straight session on Monday. However, hawkish comments from the Reserve Bank of Australia (RBA) may limit further losses for the AUD/USD pair. Traders are cautious as they await key domestic inflation data set for release on Wednesday, which could impact RBA’s monetary policy outlook.
The Reserve Bank of Australia noted that the current cash rate of 4.35% is sufficiently restrictive to bring inflation within the 2%-3% target range while also supporting employment. As a result, the RBA is unlikely to consider a rate cut as soon as next month.
The US Dollar (USD) strengthens as recent positive economic data from the United States (US) has fueled expectations for a more cautious stance from the Federal Reserve (Fed) in November. According to the CME FedWatch Tool, there is a 92.8% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a more substantial 50-basis-point cut.
Daily Digest Market Movers: Australian Dollar depreciates as Fed may adopt less dovish stance
- Over the past three weeks, allies of former President Donald Trump have faced at least 10 court defeats in key battleground states that could impact the outcome of the November 5 election between Republican candidate Trump and his Democratic opponent, Vice President Kamala Harris.
- The heightened uncertainty surrounding the Middle East conflict may have strengthened the safe-haven appeal of the US Dollar (USD). Israel's targeted attack on Iran early Saturday, conducted in coordination with Washington and limited to missile and air defense sites, was more restrained than many had anticipated.
- The US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9 previously, exceeding the forecast of 69.0. Additionally, Durable Goods Orders dropped by 0.8% month-over-month in September, a smaller decline than the anticipated 1.0% decrease.
- S&P Global has released its preliminary October US Purchasing Managers Index (PMI) readings, showing positive momentum across sectors. The Composite PMI rose to 54.3, up from the previous 54.0. The Services PMI exceeded expectations at 55.3, compared to the forecasted 55.0, and saw a slight increase from the previous 55.2. Meanwhile, the Manufacturing PMI also came in stronger at 47.8, above the expected 47.5, and improving from the prior reading of 47.3.
- Australia's Judo Bank Composite PMI slightly rose to 49.8 in October, up from 49.6 in September, signaling a second straight month of contraction in private sector output. The Services PMI inched up to 50.6 from 50.5, marking its ninth consecutive month of expansion, while the Manufacturing PMI dipped to 46.6 from 46.7, continuing its decline.
- In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.
- RBA Deputy Governor Andrew Hauser highlighted, last week, the country's strong labor participation rate and stressed that, although the RBA relies on data, it is not overly fixated on it.
Technical Analysis: Australian Dollar moves below 0.6600 within the descending channel
The AUD/USD pair trades around 0.6600 on Monday, with daily chart technical analysis suggesting a short-term bearish outlook. The pair is trending lower within a descending channel pattern, and the 14-day Relative Strength Index (RSI) is approaching 30, reinforcing the bearish sentiment.
On the support side, the AUD/USD pair may test the region near the lower boundary of the descending channel, around the 0.6560 level.
Regarding resistance, the immediate barrier is at the psychological level of 0.6600, followed by the upper boundary of the descending channel at 0.6630. A breakout above this level could allow the pair to test the nine-day Exponential Moving Average (EMA) at 0.6652.
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 weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.01% | 0.03% | 0.11% | -0.02% | 0.17% | 0.27% | 0.06% | |
| EUR | -0.01% | 0.13% | 0.02% | -0.03% | 0.23% | 0.25% | 0.07% | |
| GBP | -0.03% | -0.13% | 0.72% | -0.04% | 0.16% | 0.21% | 0.19% | |
| JPY | -0.11% | -0.02% | -0.72% | -0.06% | -0.58% | -0.59% | -0.52% | |
| CAD | 0.02% | 0.03% | 0.04% | 0.06% | 0.14% | 0.21% | 0.10% | |
| AUD | -0.17% | -0.23% | -0.16% | 0.58% | -0.14% | -0.01% | -0.16% | |
| NZD | -0.27% | -0.25% | -0.21% | 0.59% | -0.21% | 0.01% | -0.21% | |
| CHF | -0.06% | -0.07% | -0.19% | 0.52% | -0.10% | 0.16% | 0.21% |
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.
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