Australian Dollar stays quiet amid a stable US Dollar, awaits US data, Fed Powell's speech

• Australian Dollar loses ground as the S&P/ASX 200 Index moves lower.
• Australian TD Securities Inflation (YoY) rose by 4.0% in February, against the previous increase of 4.6%.
• US Dollar maintains stability on improved US Treasury yields.
• US ISM Manufacturing PMI (Feb) dropped to 47.8 from 49.1, against the anticipated increase to 49.5.
• PBoC's Premier Li Qiang is expected to reveal China's economic growth target of around 5% on Tuesday.

The Australian Dollar (AUD) trims its intraday gains and moves in the negative direction on Monday, influenced by a stable US Dollar amid improved US Treasury yields. Additionally, the decline of the ASX 200 index provided further downward pressure on the Aussie Dollar, thereby undermining the AUD/USD pair. Traders are likely awaiting key Australian data releases, including the Services Purchasing Managers Index (PMI) for February on Tuesday and the Gross Domestic Product (GDP) for the fourth quarter of 2023 on Wednesday.

Australian Dollar has received some support from the Australia Melbourne Institute Inflation for February, which showed a year-over-year rise of 4.0%. However, this increase was lower than the previous rise of 4.6%. Building Permits (MoM) declined by 1.0% in January, contrary to the expected rise of 4.0%. Nevertheless, this figure represented an improvement from the previous decrease of 10.1%. Furthermore, last week's Consumer Price Index (CPI) data indicated a 3.4% rise in January, slightly below the market consensus of 3.5%. This data supported the case for the Reserve Bank of Australia (RBA) to consider cutting interest rates later this year.

The US Dollar Index (DXY) could be driven lower due to a contraction in the United States manufacturing sector observed in February. Despite this contraction, Federal Reserve (Fed) officials have maintained a cautious stance and have not signaled any immediate interest rate cuts, which provides some support for the US Dollar. Investors closely monitor upcoming economic data releases, including the ISM Services PMI data, ADP Employment Change, and Nonfarm Payrolls for February. Moreover, the focus will be on the speech of Federal Reserve Chair Jerome Powell on Wednesday and Thursday.

Daily Digest Market Movers: Australian Dollar depreciates amid a stable US Dollar

• Australia’s TD Securities Inflation (MoM) decreased by 0.1% in February, lower than the previous rise of 0.3%.
• Australian Bureau of Statistics released Company Gross Operating Profits (QoQ), rising by 7.4% in the fourth quarter of 2023 against the expected 1.8% increase and the previous decrease of 1.6%.
• Australian Building Permits (YoY) rose by 10% in January, swinging from the previous decline of 24%.
• Judo Bank Manufacturing PMI indicated a slight improvement in Australia's manufacturing sector, with the February reading rising to 47.8 from 47.7 in the previous period.
• The seasonally adjusted Australian Retail Sales (MoM) grew by 1.1% in January, lower than expected 1.5% but swinging from the previous decline of 2.7%.
• Australian Private Capital Expenditure improved by 0.8% in the fourth quarter of 2023, from the expected 0.5% and 0.6% prior.
• Warren Hogan, Chief Economic Advisor at Judo Bank, expressed concerns about Australia's manufacturing sector, stating that it is not experiencing growth. This observation calls into question the notion of a post-pandemic manufacturing revival.
• China's National People's Congress (NPC) spokesman Lou Qinjian shared with the news media that Congress will hold its annual meeting in Beijing from March 5 to March 11. Lou stated that the government “will make new laws to deepen economic reform including in financial institutional reform to promote private companies.” Moreover, Premier of the People's Republic of China (PBoC), Li Qiang is expected to reveal China's economic growth target of around 5% at the session on Tuesday.
• Atlanta Fed President Raphael W. Bostic has expressed his expectation that the first cut in interest rates would likely be appropriate, possibly occurring towards the end of this year at the earliest.
• Economists at Commerzbank suggest that the looming shutdown in the United States has little influence on the US Dollar thus far. They speculate that perhaps the market is becoming indifferent or desensitized to the prospect of shutdowns, leading to a lack of significant reaction.
• According to the CME FedWatch Tool, the probability of rate cuts in March stands at 5.0%, while the likelihood of cuts in May and June is estimated at 26.8% and 53.8%, respectively.
• US ISM Manufacturing PMI (Feb) dropped to 47.8 from 49.1, surprisingly missing the market expectation 49.5.
• The US Michigan Consumer Sentiment Index declined to 76.9 in February, falling below the market expectation of remaining unchanged at 79.6.
• US Personal Consumption Expenditure (PCE) Price Index grew by 2.4% YoY in January, against the 2.6% prior, in line with the market expectation. The index increased by 0.3% month-over-month, against 0.1% prior.
• US Core PCE (YoY), the Fed preferred inflation gauge, rose by 2.8% compared to December’s reading of 2.9, matching with the consensus. The monthly figure showed a rise of 0.4% as expected, above the previous rise of 0.1%.
• The preliminary US Gross Domestic Product Annualized grew by 3.2% in the fourth quarter of 2023, slightly below market expectations of remaining steady at 3.3%.
• The preliminary US Gross Domestic Product Price Index (Q4) increased by 1.7% against the expected and previous rise of 1.5%.

Technical Analysis: Australian Dollar declines to 0.6520 before the psychological support

The Australian Dollar hovers around 0.6520 on Monday. The immediate resistance is observed around the 21-day Exponential Moving Average (EMA) at 0.6537, followed by the 23.6% Fibonacci retracement level at 0.6543 and the major level of 0.6550. If the pair breaks above this resistance zone, it may approach the psychological level of 0.6600. On the downside, the psychological level of 0.6500 appears as the key support followed by the previous week’s low at 0.6486. A breach below this level could potentially trigger a downward move in the AUD/USD pair, targeting the area around the major support level of 0.6450 and February’s low at 0.6442.

AUD/USD: Daily Chart