Australian Dollar holds ground above major level ahead of US Core PPI, FOMC minutes

• Australian Dollar pulls back from weekly highs ahead of the US Core PPI.
• Australia’s RBA is expected to increase interest rates; contributing support for the Aussie Dollar.
• The slew of dovish remarks by Fed officials contribute to pressure on the US Dollar.

The Australian Dollar (AUD) halts the five-day winning streak that began last week on a downbeat US Dollar (USD). The AUD/USD pair is strengthening as the likelihood of another interest rate hike by the Reserve Bank of Australia (RBA) increases. This trend can be linked to growing inflation expectations fueled by higher oil prices.

Australia might witness robust underlying commodity prices owing to the ongoing conflict in the Middle East. Additionally, Westpac Consumer Confidence data for October indicates an improvement in individual confidence during the same period.

Australia's business conditions showed resilience in September despite a deceleration in inflation. Moreover, Consumer Sentiment rebounded in October with unchanged rates, but the overall sentiment remained overshadowed by the rising cost of living.

Christopher Kent, Assistant Governor (Financial Markets) at the Reserve Bank of Australia (RBA), addressed the Bloomberg gathering in Sydney on Wednesday. Kent highlighted the chance to observe the economy's response to previous interest rate hikes. There are currently no intentions to accelerate the rate of bond holdings. In the event of bond sales, the approach would be careful to avoid market disturbances.

Kent also noted instances of rapid wage growth in specific sectors, although the overall impact remains contained. While acknowledging the significance of Consumer Price Index (CPI) data, Kent emphasized that it is not the sole factor influencing policy considerations.

The US Dollar Index (DXY) struggles to halt the losing streak that began last week. The US Dollar (USD) faced challenges due to the downbeat US Treasury yields on Wednesday.

Furthermore, a series of dovish-leaning comments from Fed policymakers have resonated in the markets, with many expressing worries that elevated long-term US bond yields might hinder their inclination to raise rates in the upcoming meetings.

Daily Digest Market Movers: Australian Dollar snaps the wining streak ahead of US data releases

• Australia experienced a rebound in inflation in August, primarily attributed to higher oil prices. This development increases the likelihood of another interest rate hike by the Reserve Bank of Australia (RBA).
• The escalation of the Middle East conflict could prompt the RBA to implement a 25 basis points (bps) interest rate hike, bringing it to 4.35% by the end of the year.
• The heightened geopolitical tension is contributing to increased demand for commodities like energy and gold, positively influencing the performance of the AUD/USD pair.
• Australia’s Westpac Consumer Confidence showed that current buying conditions improved in October. The index rose 2.9% from the previous 1.5% decline in September.
• After engaging in discussions with US Senators on Tuesday, China's Commerce Minister, Wang Wentao, expressed that "both sides had rational and pragmatic discussions." Emphasizing the significance of the US-China economic and trade relationship.
• The US Nonfarm Payroll report for September revealed a notable increase of 336,000 jobs, surpassing the market expectation of 170,000. The revised figure for August stood at 227,000.
• US Average Hourly Earnings (MoM) remained steady at 0.2% in September, falling short of the expected 0.3%. On an annual basis, the report indicated a rise of 4.2%, below the anticipated consistent figure of 4.3%.
• The yields on US Treasury bonds declined on Wednesday, with the 10-year US Treasury bond yield marked lower at 4.54%, down by 2.08% at the time of writing.
• Atlanta's Fed President Raphael Bostic went on record stating that the current monetary policy is already restrictive, rendering additional rate hikes unnecessary, following the dovish trajectory established by two fellow Fed colleagues on Monday, Minneapolis Fed President Neel Kashkari echoed a similar sentiment on Tuesday.
• Investors will closely watch economic data, particularly focusing on inflation figures. The Producer Price Index (PPI) is scheduled for Wednesday, followed by the release of the FOMC meeting minutes and the Consumer Price Index (CPI) on Thursday along with Australia’s Consumer Inflation Expectations.

Technical Analysis: Australian Dollar pulls back, 23.6% Fibonacci retracement acts as a barrier

The Australian Dollar hovers below the 23.6% Fibonacci retracement level at 0.6429 at the time of writing on Wednesday, presenting a noteworthy barrier. A decisive breakthrough above this level could open the door for further upward exploration, targeting the psychological level of 0.6450. Beyond that, the 50-day Exponential Moving Average (EMA) at 0.6456 emerges as a potential resistance, following the 38.2% Fibonacci retracement at 0.6518. On the downside, a pivotal support level is identified at 0.6400, following the monthly low at 0.6342. These levels play a crucial role in indicating potential shifts in the trajectory of the AUD/USD pair.

AUD/USD: Daily Chart