- AUD/USD holds lower grounds at yearly bottom after falling the most in five weeks the previous day.
- RBA’s dovish halt, firmer US Treasury bond yields and China concerns keep Aussie sellers hopeful.
- US Factory Orders came in downbeat but details were impressive to defend soft landing talks.
- Australia Q2 GDP, speech from RBA’s Lowe and US ISM Services PMI for August eyed for further directions.
AUD/USD bears lick their wounds at the lowest level in 2023 after falling the most in five weeks as traders await Australia’s second quarter (Q2) Gross Domestic Product (GDP) details on early Wednesday. That said, the Aussie pair seesaws near 0.6380 after falling to 0.6357, the lowest since November 2022 on multiple catalysts.
Be it China’s disappointing data or the Reserve Bank of Australia’s (RBA) dovish halt, not to forget the broad US Dollar strength amid firmer yields and mostly upbeat statistics at home, everything contributed to the AUD/USD pair’s slump the previous day. However, the market’s consolidation ahead of the Aussie Q2 GDP, US ISM Services PMI and RBA Governor Philip Lowe’s last speech before leaving the designation seem to help the pair sellers take a breather.
On Tuesday, the Reserve Bank of Australia (RBA) matched market forecasts by keeping the benchmark rates unchanged at 4.10% while suggesting, via the RBA Rate Statement, that inflation appears peaking. It’s worth noting, however, that the statements suggesting Australia’s below-trend growth and expectations supporting the continuation of the same pattern for a while also seemed to have drowned the Australian Dollar (AUD) afterward.
Further Australia’s S&P Global Composite PMI and Services PMI rose to 48.0 and 47.8 versus 47.1 and 46.7 respective priors but failed to impress the Aussie pair buyers.
Elsewhere, China's Caixin Services Purchasing Managers' Index (PMI) for August dropped to the lowest level of the year with 51.8 figures versus 54.1 prior. While giving the details, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said that the gauges for business activity and total new business remained above 50 for the eighth consecutive month, but both readings were lower than in July.
It’s worth observing that the market’s lack of confidence in the Chinese measures to defend the economy, as well as the recent Sino-American tensions over Taiwan and the US businesses’ discomfort in Beijing, also challenged the market sentiment and put a floor under the US Dollar.
That said, China recently announced a slew of quantitative and qualitative measures to defend the economy from losing the post-COVID-19 recovery. On the same line was the news suggesting the ability to avoid default by China’s biggest reality player Country Garden.
Talking about the US data, US Factory Orders for July dropped to the lowest since mid-2020 while posting -2.1% MoM figures versus -0.1% expectations and 2.3% previous growth. However, the orders excluding transport rose 0.8% MoM, Shipments of goods stayed firmer and inventories marked the first increase in three months.
More importantly, Federal Reserve (Fed) Governor Christopher Waller signaled during a CNBC interview that data will drive whether the Fed needs to lift rates again, as well as confirm whether the Fed is done raising rates. The policymaker also added, "Data is looking good for soft landing scenario,” which in turn allowed the US Dollar to remain firmer.
Against this backdrop, the US Dollar Index (DXY) rose to the highest level since mid-March while tracing the upbeat US Treasury bond yields, which in turn exerted downside pressure on riskier assets like equities, commodities and Antipodeans including the AUD/USD pair.
Looking ahead, the AUD/USD traders should pay close attention to Australia’s Q2 GDP, expected to improve on QoQ to 0.30% from 0.2% but ease to 1.7% YoY from 2.3%. Following that, the US ISM Services PMI for August, expected 52.6 versus 52.7 prior, will be important to watch. Above all, RBA Governor Lowe’s last speech before resigning will be crucial to watch for clear directions as any signals of policy pivot could drive Aussie further towards the south.
Also read: ISM Services PMI Preview: Strength may spook markets, boosting US Dollar
Technical analysis
A clear downside break of three-week-old rising support line, now resistance around 0.6410, directs the AUD/USD pair sellers towards a descending support line from early March surrounding 0.6340.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays near 1.0400 in thin holiday trading
EUR/USD trades with mild losses near 1.0400 on Tuesday. The expectation that the US Federal Reserve will deliver fewer rate cuts in 2025 provides some support for the US Dollar. Trading volumes are likely to remain low heading into the Christmas break.
GBP/USD struggles to find direction, holds steady near 1.2550
GBP/USD consolidates in a range at around 1.2550 on Tuesday after closing in negative territory on Monday. The US Dollar preserves its strength and makes it difficult for the pair to gain traction as trading conditions thin out on Christmas Eve.
Gold holds above $2,600, bulls non-committed on hawkish Fed outlook
Gold trades in a narrow channel above $2,600 on Tuesday, albeit lacking strong follow-through buying. Geopolitical tensions and trade war fears lend support to the safe-haven XAU/USD, while the Fed’s hawkish shift acts as a tailwind for the USD and caps the precious metal.
IRS says crypto staking should be taxed in response to lawsuit
In a filing on Monday, the US International Revenue Service stated that the rewards gotten from staking cryptocurrencies should be taxed, responding to a lawsuit from couple Joshua and Jessica Jarrett.
2025 outlook: What is next for developed economies and currencies?
As the door closes in 2024, and while the year feels like it has passed in the blink of an eye, a lot has happened. If I had to summarise it all in four words, it would be: ‘a year of surprises’.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.