- The Australian Dollar may limit its downside as high inflation prompts the RBA to delay rate cuts.
- Australia’s May inflation has sparked warnings that the RBA might raise the cash rate to 4.6% in September.
- The US Dollar may struggle as slowing US employment growth could lead the Fed to reduce rates sooner.
The Australian Dollar (AUD) remains stable despite improved risk aversion on Monday. The renewed demand for the US Dollar (USD) puts pressure on the AUD/USD pair. The AUD could limit its downside due to persistently high inflation, stronger Retail Sales, and Services PMI. These factors might prompt the Reserve Bank of Australia (RBA) to delay potential rate cuts.
The RBA’s June Meeting Minutes indicated that policymakers emphasized the need to stay alert to upside inflation risks. The policymakers noted that a significant rise in prices might necessitate substantially higher interest rates. Although rates were steady in June, May’s CPI, which surprisingly increased to 4.0% from the previous 3.6%, prompted warnings that the RBA might raise the cash rate to 4.6% in September.
The US Dollar (USD) may face challenges as US employment growth slowed in May, according to data released on Friday. While Nonfarm Payrolls (NFP) exceeded market expectations in June, the growth was slower compared to May's increase. Additionally, the Unemployment Rate edged higher in June. This could lead traders to speculate that the Federal Reserve (Fed) might reduce interest rates sooner rather than later.
The CME's FedWatch Tool shows that rate markets are pricing in an almost 70.7% probability of a rate cut in September, up from 64.1% a week earlier.
Daily Digest Market Movers: Australian Dollar declines due to risk aversion
- US Nonfarm Payrolls (NFP) increased by 206,000 in June, following a rise of 218,000 in May. This figure surpassed the market expectation of 190,000.
- The US Unemployment Rate edged up to 4.1% in June from 4.0% in May. Meanwhile, Average Hourly Earnings decreased to 3.9% year-over-year in June from the previous reading of 4.1%, aligning with market expectations.
- According to the Australian Bureau of Statistics on Thursday, Australia's trade surplus for May was A$5,773 million ($3,868 million), lower than the expected A$6,678 million and down from the previous reading of A$6,548 million.
- Australia's Retail Sales, a measure of the country's consumer spending, increased by 0.6% MoM in May, up from the previous month's 0.1% rise. This figure exceeded market expectations of a 0.2% increase.
- Judo Bank's Australia Services PMI increased to 51.2 MoM, up from the previous month's 51.0, surpassing the forecasted drop to 50.6. Meanwhile, the Composite PMI rose to 50.7 MoM, compared to 50.6 in the previous month.
- China's Services Purchasing Managers' Index (PMI) fell from 54.0 in May to 51.2 in June, according to the latest data released by Caixin on Wednesday. The market forecast was for a 53.4 figure in the reported period.
- Federal Reserve Bank of Chicago President Austan Goolsbee stated on BBC Radio on Wednesday that bringing inflation back to 2% will take time and that more economic data are needed. However, on Tuesday, Fed Chair Jerome Powell said that the central bank is getting back on the disinflationary path, per Reuters.
Technical Analysis: Australian Dollar holds position around 0.6750
The Australian Dollar trades around 0.6740 on Monday. The analysis of the daily chart shows that the AUD/USD pair breaks below a rising wedge, indicating a potential bearish reversal. Additionally, the 14-day Relative Strength Index (RSI) consolidates slightly below the 70 level. A downward move in the RSI would suggest the asset may undergo a correction.
The AUD/USD pair is likely to test the lower boundary of the rising wedge around 0.6755, followed by the psychological level of 0.6800 near the upper boundary of the wedge.
On the downside, the AUD/USD pair may navigate the region around the 50-day Exponential Moving Average (EMA) at 0.6639.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.03% | -0.22% | -0.06% | 0.02% | -0.12% | -0.10% | |
| EUR | -0.11% | 0.13% | 0.00% | 0.15% | 0.08% | 0.11% | 0.13% | |
| GBP | -0.03% | -0.13% | -0.18% | 0.05% | -0.06% | -0.02% | 0.00% | |
| JPY | 0.22% | 0.00% | 0.18% | 0.17% | 0.27% | 0.26% | 0.18% | |
| CAD | 0.06% | -0.15% | -0.05% | -0.17% | 0.04% | -0.06% | -0.02% | |
| AUD | -0.02% | -0.08% | 0.06% | -0.27% | -0.04% | 0.03% | 0.05% | |
| NZD | 0.12% | -0.11% | 0.02% | -0.26% | 0.06% | -0.03% | 0.02% | |
| CHF | 0.10% | -0.13% | 0.00% | -0.18% | 0.02% | -0.05% | -0.02% |
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).
Economic Indicator
Westpac Consumer Confidence
The Westpac Consumer Confidence released by the Faculty of Economics and Commerce Melbourne Institute captures the level of sentiment that individuals have in economic activity reflecting respondents' evaluations of their family finances over the past and coming year, expectations about the one-year and five-year economic conditions and views about current buying conditions for major household items. Generally speaking, a high reading is seen as positive (or bullish) for the AUD, whereas a low reading is seen as negative (or bearish).
Read more.Next release: Tue Jul 09, 2024 00:30
Frequency: Monthly
Consensus: -
Previous: 1.7%
Source: University of Melbourne
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