Australian Dollar Faces Challenges Amid US Dollar Rally

Australian Dollar Faces Challenges

Australian Dollar Struggles

The Australian Dollar (AUD) is currently grappling with its value as it endures its fourth consecutive day of decline. This decline is primarily attributed to the resurgence of the US Dollar (USD), fueled by the positive performance of US Treasury yields.

Reserve Bank of Australia’s Monetary Policies

Under the leadership of Governor Michele Bullock, the RBA is contemplating the adoption of more stringent interest rate increases. Governor Bullock asserts that if inflation persists beyond expected levels, the RBA stands ready to implement appropriate policy measures.

Shifting Employment Landscape

Australia’s employment landscape is undergoing intriguing transformations. In September, there was an unexpected and sharp decline in Employment Change, introducing an unexpected twist to the equation. On a positive note, the Unemployment Rate took a more favorable turn by declining more than expected, defying the anticipated trend.

Federal Reserve’s Monetary Policy

Federal Reserve (Fed) Chairman Jerome Powell has conveyed that the central bank has no immediate plans to increase interest rates.  Powell also hinted that further tightening of monetary policy could be warranted if there are additional signs of economic growth or if the labor market ceases to exhibit improvement.

US Economic Data

US weekly Initial Jobless Claims saw a drop to 198K, falling short of market expectations for the week ending October 14. This marked the lowest level since January. Additionally, Existing Home Sales Change contracted by 2.0% month-on-month in September, but Existing Home Sales experienced an uptick to 3.96 million. The US Unemployment Rate improved to 3.6%, deviating from the expected stability at 3.7% in September. In the US bond market, fluctuations continue as the 10-year Treasury yield stabilizes around 4.94%, while the 2-year yield dipped to 5.09%.

Australian Dollar Market Outlook

Market participants will closely monitor the US S&P Global PMI on Tuesday. The Q3 Gross Domestic Product (GDP) on Thursday, and the Core Personal Consumption Expenditures (PCE) on Friday. Attention will also be directed towards the Australian S&P Global PMI. Consumer Price Index (CPI), and the forthcoming speech by RBA Governor Bullock.

Australian Dollar Technical Analysis 

From a technical standpoint, the Australian Dollar remains positioned above the significant 0.6300 level, trading at around 0.6310 on Monday. Notable support is found at the 0.6300 level, with further support indicated by the monthly low at 0.6285. Looking upward, a pivotal resistance point lies at the 14-day Exponential Moving Average (EMA) at 0.6347, followed by a major level at 0.6400. Surpassing this threshold holds the potential for an advance towards the 23.6% Fibonacci retracement level at 0.6429.

Australian Dollar
AUDUSD Daily Chart

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