Australian Dollar extends losses on a third day after stronger US data

Australian Dollar continues to lose ground after the release of stronger US data.
Australia's Unemployment Rate has outperformed expectations, standing at 3.6%.
US Jobless Claims declined to 198K the lowest level since January.
Existing home sales fell 2.0% in September, the lowest level since 2010.
Fed Powell suggested that the central bank is not planning to raise rates in the short term.

The Australian Dollar (AUD) faces a third consecutive day of losses, likely influenced by a prevailing risk-off sentiment. However, the AUD/USD pair found some uplift from a weakened US Dollar (USD) following comments by Federal Reserve (Fed) Chair Jerome Powell on Thursday. Powell's indication that the central bank is not planning to raise rates in the short term provides support for the pair.

Australia's employment landscape is undergoing some intriguing developments. In September, Employment Change declined more than expected, introducing an unexpected twist to the equation. On the bright side, the Unemployment Rate took a positive turn by falling more than anticipated, deviating from the expected trend.

The US Dollar Index (DXY) rebounds from the recent losses, and this could be attributed to the higher US Treasury yields, coupled with robust economic data from the United States (US).

United States (US) job data showed the economy remains solid. The weekly Initial Jobless Claims have dropped to their lowest level since January, signaling a solid and resilient job market. On the other hand, existing home sales have fallen to their lowest point since 2010, suggesting challenges in the housing market.

The decline in existing home sales is particularly noteworthy, pointing to the negative impact of higher mortgage costs on housing market confidence.

Daily Digest Market Movers: Australian Dollar extends losses on stronger US employment data

Australia's Unemployment Rate for September surprised on the positive side, coming in at 3.6%. This outperformed expectations of 3.7% and matched the previous figure of 3.7%.
Australian Employment Change for the same month was 6.7K, falling short of the consensus forecast of 20K. This is a notable decline from the 64.9K jobs added in August.
Australia's central bank expresses heightened concern about the inflation impact stemming from supply shocks. Governor of the Reserve Bank of Australia, Michele Bullock stated that if inflation persists above projections, the RBA will take responsive policy measures. There is an observable deceleration in demand, and per capita consumption is on the decline.
Geopolitical tensions can be a real rollercoaster for market sentiment. The situation in Israel, with preparations for a potential ground invasion of Gaza, is likely adding a layer of uncertainty for traders of the AUD/USD pair. The fact that US President Joe Biden is scheduled to address the nation on Thursday suggests the significance of the matter on the global stage.
Furthermore, China's Retail Sales (YoY) demonstrated a rise of 5.5%, surpassing both the previous figure of 4.6% and the expected 4.9%.
Federal Reserve Chair Jerome Powell clarified that additional tightening of monetary policy might be justified if there's substantial evidence of growth surpassing the norm or if the labor market ceases to improve.
Powell underscored that the primary concern remains inflationary risks. However, the policymaker indicated that the central bank is not planning to raise rates in the short term providing support for the AUD/USD pair.
US weekly Initial Jobless Claims declined to 198K, fell short of the market expectations of 212K for the week ending October 14, the lowest level since January.
Existing home sales fell 2.0% MoM in September and 19% YoY, the lowest level since 2010.
US Unemployment Rate rose by 3.6%, which was expected to remain consistent at 3.7% in September.
Building Permits for September came in at 1.475 million, surpassing the expected 1.45 million. On the other hand, Housing Starts rebounded to 1.35 million, just shy of the market consensus of 1.38 million.
The US Bureau of Economic Analysis (BEA) disclosed that Retail Sales exceeded expectations of 0.3% MoM, which increased to 0.7% in September. While Retail Sales Control Group rose by 0.6% compared to the previous hike of 0.2%.
This robust performance underscores the resilience of consumers. Subsequently, the Federal Reserve reported that Industrial Production showed improvement by 0.3%, which was expected to remain at 0.0%.
Market fluctuations persist in the US bond market, as the 10-year Treasury yield stabilizes around 4.99%, marking its highest point since 2007. Meanwhile, the 2-year yield has dipped to 5.16%.
No major reports are on the horizon in the US. Federal Reserve officials Logan, Mester, and Harker are set to address the public, but their speeches are unlikely to spring any surprises.

Technical Analysis: Australian Dollar hovers above 0.6300 major level after remarks by Fed’s Powell

The Australian Dollar is currently trading lower around 0.6310 on Friday, in alignment with significant support at the 0.6300 level. The immediate support is marked by the monthly low at 0.6285. On the upside, a critical resistance is identified around the 14-day Exponential Moving Average (EMA) at 0.6354, followed by the major level of 0.6400. A breakthrough above this level has the potential to reach around the 23.6% Fibonacci retracement level at 0.6429. These technical indicators serve as valuable tools for traders, offering insights into potential resistance zones that could impact the trajectory of the Australian Dollar.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.13%	0.13%	0.11%	0.23%	0.04%	0.22%	0.05%
EUR	-0.14%		-0.02%	-0.03%	0.09%	-0.08%	0.09%	-0.08%
GBP	-0.13%	-0.01%		-0.03%	0.09%	-0.07%	0.09%	-0.08%
CAD	-0.10%	0.04%	0.01%		0.15%	-0.05%	0.12%	-0.05%
AUD	-0.25%	-0.10%	-0.10%	-0.12%		-0.17%	0.00%	-0.16%
JPY	-0.04%	0.08%	0.09%	0.03%	0.18%		0.17%	0.01%
NZD	-0.26%	-0.10%	-0.12%	-0.13%	-0.01%	-0.18%		-0.19%
CHF	-0.06%	0.06%	0.06%	0.04%	0.16%	-0.01%	0.18%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.