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The Australian Dollar downs (AUD) terminated a three-day winning streak on Tuesday. primarily attributed to the resurgence of the US Dollar (USD). In which exerted a downward pressure on the AUD/USD pair. Nonetheless, the positive performance of Australian Retail Sales has provided fortification to the Australian currency. That comes in anticipation of the forthcoming policy decision by the United States Federal Reserve (Fed). Scheduled for Wednesday. Furthermore, the Reserve Bank of Australia (RBA) is poised to announce its policy decision on November 7.
It is widely anticipated that Australia’s central bank will effectuate a 25 basis point increase in interest rates during the impending meeting, driven by heightened inflation. In the preceding week, the Australian Consumer Price Index (CPI) unveiled third-quarter expansion in 2023. Surpassing the growth observed in the second quarter. Additionally, the seasonally adjusted Retail Sales (Month-on-Month) exceeded market expectations. Reporting a significantly elevated reading in September.
Chinese PMI Contraction and US Dollar Ahead of Fed Decision
Away of Australian Dollar downs facts, On Tuesday, a Chinese report divulged a contraction in both the manufacturing and non-manufacturing Purchasing Managers’ Index (PMI) for September. Intensifying concerns regarding the sluggish economic conditions prevailing in the world’s second-largest economy. This development raises the possibility of an impact on the Australian Dollar. That given Australia’s substantial role as China’s principal trading partner.
The US Dollar Index (DXY) retraced recent losses in anticipation of the US Fed policy decision. Modest economic data released by the United States (US) on the preceding Friday failed to bolster the Greenback. As market participants expect the Fed to maintain its interest rates at 5.5% during the forthcoming meeting.
However, the December meeting is expected to be fundamentally data-driven. According to the CME Fedwatch tools, market sentiment incorporates a 23% probability of the Fed implementing a 25 basis point interest rate hike in the December meeting.
Australian Dollar downs and Market Insights: Economic Trends and US-China Diplomacy
In a market update, it is noteworthy that Australia’s Retail Sales (Month-on-Month) for September surged to 0.9%. Surpassing both market expectations of 0.3% and the previous figure of 0.2%. Australia’s Producer Price Index (PPI) exhibited a slight deceleration, declining to 3.8% on an annual basis in Q3, in comparison to the preceding quarter’s 3.9%. On a quarterly basis, the nation’s PPI exhibited a noteworthy increase to 1.8%, up from the prior reading of 0.5%. The Australian Consumer Price Index (CPI) for the third quarter of 2023 reached 1.2%, surpassing both the 0.8% uptick in the preceding quarter and the market consensus of 1.1% for the same period.
The Reserve Bank of Australia conveyed heightened concern regarding the inflationary impact stemming from supply disruptions. Michele Bullock, Governor of the Reserve Bank of Australia, stated that responsive policy measures would be taken if inflation persists above projections. Furthermore, there is observable deceleration in demand, accompanied by a decline in per capita consumption.
China’s NBS Manufacturing Purchasing Managers’ Index (PMI) exhibited an unexpected contraction in September, declining to 49.5 from the expansion of 50.2 observed in July and falling short of the market consensus of 50.2. In addition, the NBS Services PMI also recorded a decline, falling to 50.6 in September in comparison to the anticipated figure of 51.8 and the prior reading of 51.7.
Also Read: AUD/USD Currency pair Trends and Economic Indicators
Reports suggest a tentative agreement between the United States and China for a meeting between Presidents Joe Biden and Xi Jinping in November, following months of strategic diplomatic efforts to improve bilateral relations.
Economic Data and Fed Expectations in Focus
The US Core Personal Consumption Expenditures Price Index (YoY) witnessed a slight decline to 3.7% from the previous reading of 3.8%. However, the monthly index showed an increase to 0.3%. Aligning with expectations and exceeding the 0.1% reported previously.
The University of Michigan Consumer Index exceeded expectations in October. Reporting a figure of 63.8, which was anticipated to remain consistent at 63.0.
Market participants are eagerly anticipating the Federal Reserve’s Interest Rate Decision on Wednesday. With prevailing expectations for interest rates to remain at 5.5% during the upcoming meeting.
Investor attention will be primarily directed towards key indicators such as the US ADP Employment Change and ISM Manufacturing PMI for October.
Australian Dollar Technical Analysis: Key Levels and Potential Upside
In the realm of technical analysis, and in the light of Australian Dollar downs fact, the Australian Dollar is currently positioned in proximity to a critical support level at 0.6350. The annual low at 0.6270 is likely to serve as a pivotal support, coinciding with the prominent level around 0.6250. On the upside, the pivotal resistance at 0.6400 holds significance, complemented by the 50-day Exponential Moving Average (EMA) at 0.6405. A successful breach above this resistance level may potentially propel the currency toward the 23.6% Fibonacci retracement level at 0.6417.
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Disclaimer:
Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
