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- Australian Dollar retraces recent gains despite improved market optimism
Australian Dollar retraces recent gains despite improved market optimism
- The Australian Dollar declines as the US Dollar advances due to improved Treasury yields.
- The downside of the AUD could be limited due to improved risk sentiment amid dovish sentiment surrounding the Fed.
- The US Dollar may face challenges due to rising odds of a 25 basis point rate cut by the Fed.
The Australian Dollar (AUD) edges lower against the US Dollar (USD) as traders await the ISM Manufacturing PMI data due on Tuesday. However, the AUD/USD pair may find some support from improved risk sentiment, driven by increasing dovish expectations regarding the US Federal Reserve’s (Fed) policy outlook.
Traders are now focusing on Australia's Q2 Gross Domestic Product (GDP) and July Trade Balance data, as well as an upcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock later in the week, to gather more insights into the central bank's hawkish stance on monetary policy.
The US Dollar strengthens as Treasury yields continue to rise, but gains may be limited by growing expectations of a 25 basis point rate cut by the Fed in September. Traders will turn their attention to upcoming US employment data, particularly the August Nonfarm Payrolls (NFP), for further insights into the potential timing and scale of Fed rate cuts.
Daily Digest Market Movers: Australian Dollar declines despite the hawkish RBA
- Australia’s Building Permits surged by 10.4% month-over-month in July, sharply rebounding from a 6.5% decline in June, marking the strongest growth since May 2023. On an annual basis, the growth rate reached 14.3%, a significant recovery from the previous 3.7% decline.
- China’s Caixin Manufacturing PMI rose to 50.4 in August, up from 49.8 in July, which is particularly noteworthy given China’s close trade relationship with Australia.
- The US Bureau of Economic Analysis reported on Friday that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous reading of 2.5% but falling short of the estimated 2.6%. Meanwhile, the core PCE, which excludes volatile food and energy prices, rose by 2.6% year-over-year in July, consistent with the prior figure of 2.6% but slightly below the consensus forecast of 2.7%.
- The US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, exceeding both the expected and previous growth rate of 2.8%. Additionally, Initial Jobless Claims showed that the number of people filing for unemployment benefits fell to 231,000 for the week ending August 23, down from the previous 233,000 and slightly below the expected 232,000.
- Australia's Private Capital Expenditure unexpectedly declined by 2.2% in the second quarter, reversing from an upwardly revised 1.9% expansion in the previous period and falling short of market expectations for a 1.0% increase. This marks the first contraction in new capital expenditure since the third quarter of 2023.
- Australia's Monthly Consumer Price Index (CPI) increased by 3.5% year-on-year in July, down from June's 3.8% but slightly above the market consensus of 3.4%. Despite the slight decrease, this marks the lowest CPI figure since March.
- Federal Reserve Atlanta President Raphael Bostic, a prominent hawk on the FOMC, indicated last week that it might be "time to move" on rate cuts due to further cooling inflation and a higher-than-expected unemployment rate. FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Bostic’s words as neutral with a score of 5.6.
Technical Analysis: Australian Dollar remains above 0.6750
The Australian Dollar trades around 0.6780 on Tuesday. Analyzing the daily chart, the AUD/USD pair is positioned above the nine-day Exponential Moving Average (EMA), suggesting a short-term bullish trend. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 level, reinforcing the overall bullish trend.
In terms of resistance, the AUD/USD pair may challenge the immediate barrier at the seven-month high of 0.6798. A break above this level could strengthen the ongoing bullish momentum, potentially pushing the pair toward the psychological level of 0.6900.
On the downside, the AUD/USD pair may test immediate support around the nine-day EMA at 0.6767, followed by the 14-day EMA at 0.6743. A break below these EMAs could weaken the bullish bias and increase downward pressure, potentially driving the pair toward the throwback level at 0.6575, with further decline possibly targeting the lower support at 0.6470.
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 | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.08% | 0.05% | 0.10% | 0.04% | 0.10% | 0.30% | 0.11% | |
| EUR | -0.08% | -0.03% | 0.03% | -0.05% | 0.01% | 0.12% | 0.03% | |
| GBP | -0.05% | 0.03% | 0.06% | -0.01% | 0.06% | 0.15% | 0.07% | |
| JPY | -0.10% | -0.03% | -0.06% | -0.09% | -0.03% | -0.01% | -0.02% | |
| CAD | -0.04% | 0.05% | 0.01% | 0.09% | 0.04% | 0.07% | 0.08% | |
| AUD | -0.10% | -0.01% | -0.06% | 0.03% | -0.04% | -0.01% | 0.01% | |
| NZD | -0.30% | -0.12% | -0.15% | 0.01% | -0.07% | 0.00% | 0.02% | |
| CHF | -0.11% | -0.03% | -0.07% | 0.02% | -0.08% | -0.01% | -0.02% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
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.
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.
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.
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.
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.
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