Australian Dollar faces downward pressure on weaker economic data

• Australian Dollar extends losses after weaker economic data on Wednesday.
• Australia’s AiG Industry Index came in at -9.9, while Building Permits declined by 4.6%.
• Upbeat US Treasury yields support the advance of the US Dollar ahead of the Fed decision.

The Australian Dollar (AUD) extends its losses for the second session, hovering around a key level on Wednesday. The AUD/USD pair faces downward pressure due to the subdued economic data from Australia, coupled with a stronger US Dollar (USD) ahead of the Federal Open Market Committee (FOMC) policy decision.

Australia’s economic data released on Wednesday, featuring the AiG Industry Index and Building Permits (MoM) for September, indicated a downturn. Nevertheless, the Aussie Dollar found reinforcement on Monday, courtesy of robust Retail Sales.

Reserve Bank of Australia (RBA) is poised to unveil its policy decision on November 7. Anticipations lean towards a 25 basis points increase in interest rates during the upcoming meeting, driven by heightened inflation.

The US Dollar Index (DXY) continues to gain ground for the second day, propelled by higher US Treasury yields as the market braces for the upcoming policy decision by the US Federal Reserve (Fed). While expectations suggest the central bank will likely uphold its current monetary policy stance in the Wednesday meeting, the outlook for December's gathering hinges on data-driven considerations.

Investors are poised to closely monitor the Federal Open Market Committee's (FOMC) post-meeting message, seeking valuable cues for market participants gauging the potential trajectory of interest rates.

Daily Digest Market Movers: Australian Dollar trades lower on the weaker economic data ahead of the Fed policy decision

• Australia’s AiG Industry Index for September reduced to 9.9 against the previous reading of a 3.5 decline, while Building Permits (MoM) declined by 4.6% against the market consensus of a 1.3% rise, swinging from the previous growth of 7.0%.
• Australia's Retail Sales (Month-on-Month) soared to 0.9% in September, surpassing market expectations of 0.3% and the previous figure of 0.2%.
• Australian Consumer Price Index (CPI) for the third quarter of 2023 reached 1.2%, exceeding both the 0.8% uptick in the previous quarter and the market consensus of 1.1% for the same period.
• The Reserve Bank of Australia stated 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.
• The Chinese Purchasing Managers' Index (PMI) data released on Tuesday has sparked concerns about the sluggish economic state of the world's second-largest economy. With Australia being China's largest trading partner, there's a heightened possibility of this development influencing the Australian Dollar.
• China's NBS Manufacturing PMI took an unexpected turn in September, contracting to 49.5, down from the 50.2 expansion observed in July and falling short of the market consensus of 50.2.
• Chinese NBS Services PMI also experienced a decline, dropping to 50.6 in September compared to the anticipated figure of 51.8 and the previous reading of 51.7.
• According to reports, there's a tentative agreement between the US and China for a meeting between Presidents Joe Biden and Xi Jinping in November. This comes after months of strategic diplomatic efforts to mend relations.
• US Core Personal Consumption Expenditures Price Index (YoY) saw a slight decline to 3.7% from the previous reading of 3.8%. However, the monthly index showed an increase to 0.3%, in line with expectations and up from 0.1% previously.
• The University of Michigan Consumer Index surpassed expectations in October, reporting a figure of 63.8, which was expected to remain consistent at 63.0.
• Investors will focus on the key indicators such as the US ADP Employment Change, and ISM Manufacturing PMI for October ahead of the Fed policy decision, with expectations of the interest rates to be kept at 5.5% in the upcoming meeting on Wednesday.

Technical Analysis: Australian Dollar hovers below 0.6350 psychological level

The Australian Dollar consolidates beneath the crucial level of 0.6350, with the annual low at 0.6270 potentially serving as a significant support, closely aligned with the major level around 0.6250. On the upside, attention is drawn to the pivotal resistance situated around the 50-day Exponential Moving Average (EMA) at 0.6400. A breakthrough above this resistance has the potential to propel the currency towards the 23.6% Fibonacci retracement level at 0.6419.

AUD/USD: Daily Chart