Australian Dollar extends gains as US Dollar weakens, focus on US Core PCE

• Australian Dollar recovers from the 10-month low after upbeat Private Sector Credit report.
• Australia’s monthly Private Sector Credit rose 0.4% compared to the expected 0.3%.
• US Dollar weakens due to the pullback in US Treasury yields.

The Australian Dollar (AUD) extends its gains on the second successive day on Friday. The AUD/USD pair recovers from recent losses, primarily supported by a correction in the US Dollar (USD) due to a pullback in US Treasury yields in the previous session. Additionally, the Aussie pair gets minor support from the Australian upbeat Private Sector Credit (MoM) data.

Australia’s Bureau of Statistics (ABS) on Thursday revealed Retail Sales rose in August on a monthly basis below the market consensus. The soft consumer spending data in August might convince the Reserve Bank of Australia (RBA) to keep the interest rate unchanged next week.

However, Australia's monthly Consumer Price Index (CPI) improved from July's reading, which could be attributed to the increasing energy prices. The rise in inflation could increase the likelihood of another interest rate hike.

The US Dollar Index (DXY) snapped a winning streak after the moderate datasets from the United States (US). Gross Domestic Product (GDP) remained consistent as expected. Initial Jobless Claims for unemployment benefits printed a lower reading than the market consensus. Moreover, US Treasury yields extend losses, which could undermine the strength of the US Dollar (USD).

The US Dollar (USD) saw a strong rally over the week, buoyed by robust economic indicators, and it climbed to its highest levels since December. Furthermore, the USD's resilience could be linked to the favorable performance of US Treasury yields. 

Daily Digest Market Movers: Australian Dollar retraces recent losses due to a pullback in the US Dollar

• AUD/USD extends gains for the second consecutive day, trading around 0.6480 at the time of writing on Friday.
• Australian Private Sector Credit (MoM) for August rose 0.4%, exceeding the market consensus to remain consistent at 0.3%. While the yearly readings reduced to 5.1% from the previous reading of 5.3%. 
• The Aussie Dollar could further face challenges due to increased risk aversion sentiment in the market due to the central banks' interest rates trajectory.
• Australian Retail Sales for August, fell to 0.2% from the previous rate of 0.5%. The index was expected to grow at a 0.3% rate.
• Australia’s Monthly Consumer Price Index (CPI) year-over-year for August rose 5.2% as expected, up from the previous rate of 4.9%.
• USD weakens due to the pullback in US Treasury yields. The yield on the 10-year US Treasury note has reached record highs.
• US GDP remained consistent at 2.1% as expected. Initial Jobless Claims for the week ending on September 22, improved to 204K from the 202K prior, falling short of the 215K expected.
• US Pending Home Sales showed a decline of 7.1%, exceeding the market expectation of a 0.8% fall, swinging from the 0.9% rise previously.
• Chicago Fed President Austan Goolsbee expressed confidence that the Fed will bring inflation back to its target. Goolsbee also highlighted the rare opportunity to achieve this without a recession, indicating the US Federal Reserve’s (Fed) commitment to managing inflation while sustaining economic growth.
• Federal Reserve Bank of Richmond President Thomas Barkin acknowledged that recent inflation data has been positive but emphasized that it's premature to determine the future course of monetary policy. Barkin also noted that the data lost during a government shutdown could complicate the understanding of the economy.
• Traders await the US data such as the Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of consumer inflation, which is due on Friday. The annual rate is expected to reduce from 4.2% to 3.9%.

Technical Analysis: Australian Dollar looks to reach 0.6500 psychological level

Australian Dollar trades higher around 0.6480 aligned with the 0.6500 psychological level on Friday. A firm break above the latter could support the Aussie Dollar (AUD) to explore the region around 38.2% Fibonacci retracement at 0.6549 lined up with the 0.6550 psychological level. On the downside, the fresh monthly low at 0.6331, followed by the 0.6300 psychological level could act as the key support.

AUD/USD: Daily Chart