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The Australian Dollar Descends (AUD) and is currently grappling with a two-day decline after retracing intraday gains on Friday. Challenges confront the AUD/USD pair, highlighted by the latest Reuters poll. Wherein 28 out of 30 economists anticipate the Reserve Bank of Australia (RBA) maintaining the cash rate unchanged on December 5. The poll indicates that 20 out of 29 economists expect the RBA to keep interest rates at their current levels until March next year.
The remaining economists in the survey predict a minimum 0.25% rate hike by that time. Despite these expectations, the resurgence of the US Dollar is exerting pressure on the AUD/USD pair. Furthermore, lackluster Chinese data on Thursday has dampened market sentiment, leading to a decline in the Australian Dollar (AUD).
For November, Australia’s Judo Bank Manufacturing PMI met expectations at 47.7. Signifying a slight decrease from the previous reading of 48.2. The RBA Commodity Index SDR (YoY) recorded a decline of 10.5% in November, contrasting with the prior fall of 16.8%.
China’s PMI Boosts Aussie, DXY Surges on Treasury Yields, and Eyes on US Economic Indicators
As Australian Dollar Descends China’s Caixin Manufacturing PMI exceeded expectations in November. Improving to 50.7 and defying the anticipated decline from the previous reading of 49.5 to 49.8. This positive surprise in the data has the potential to provide support and strengthen the Australian Dollar. Given the interconnected economic dynamics between China and Australia.
Concurrently, the US Dollar Index (DXY) saw a surge as the US Treasury bond yield edged higher, with the 2- and 10-year Treasury yields reaching 4.73% and 4.36%. Respectively, on Thursday. Additionally, the Greenback might have found support in economic data from the United States (US).
The US Core Personal Consumption Expenditures Price Index (PCE) showed a year-on-year easing to 3.5% in October from the previous reading of 3.7%, in line with expectations. The month-on-month Core PCE Price Index decreased to 0.2% from the prior 0.3%. Furthermore, Initial Jobless Claims for the week ending November 24 totaled 218K, slightly below the anticipated 220K but higher than the revised previous figures of 211K (revised from 209K).
Investors are now awaiting the release of the US ISM Manufacturing PMI for November, along with US Federal Reserve (Fed) Chairman Jerome Powell’s speech on Friday.
Australian Dollar Descends: Q3 Contraction, CPI Dips, RBA Caution, China’s PMI, and US GDP Growth
In Q3, Australia’s Private Capital Expenditure experienced a contraction of 0.6%. Contrasting with the previous growth of 2.8%, falling short of the expected increase of 1.0%.
The Aussie Monthly Consumer Price Index (CPI) for October registered a reading of 4.9%. Indicating a decrease from September’s 5.6% and slightly below the expected 5.2%.
Reserve Bank of Australia (RBA) Governor Michele Bullock highlighted the current monetary policy’s restrictive nature, with rate hikes diminishing demand. That particularly in the context of persistent services inflation. Governor Bullock emphasized the need for caution when implementing high-interest rates to address inflation without inadvertently increasing the unemployment rate.
Also Read: Australian Dollar oscillates in Proximity to a Key Level
China’s NBS Manufacturing PMI for November decreased to 49.4 from the previous reading of 49.5. Falling below the market expectation of 49.7. The Non-Manufacturing PMI contracted to 50.2, missing the expected 51.1 and the prior reading of 50.6.
US Gross Domestic Product Annualized increased by 5.2% during the third quarter. Surpassing the previous reading of 4.9% and exceeding the market consensus of 5.0%.
The latest Fed’s Beige Book revealed that the demand for labor has been “continuing to ease” in the weeks leading up to mid-November.
Australian Dollar Descends: AUD/USD Outlook Testing Resistance at 0.6650
As of Friday, the Australian Dollar is trading higher at approximately 0.6610. The immediate obstacle is identified at the noteworthy level of 0.6650, closely followed by November’s high at 0.6676. Successfully surpassing this level could potentially pave the way for a test of the substantial resistance at the psychological threshold of 0.6700 and, subsequently, the August high at 0.6723.
Conversely, on the downside, a critical support zone is situated around the psychological level of 0.6600, coinciding with the seven-day Exponential Moving Average (EMA) at 0.6599. A clear breach below the EMA might lead the pair toward support near the 23.6% Fibonacci retracement level at 0.6580, followed by the prominent level at 0.6550.
