CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

• AUD/USD recovers to 0.6571 after dipping, despite central bank actions.
• BoJ hikes, SNB cuts rates, and other central banks are steady.
• Mixed US data: manufacturing up, services, and composite PMIs down.
• Market eyes June Fed cut, post-steady rate projections.

The Australian Dollar (AUD) tumbled against the US Dollar (USD) on Thursday despite refreshing weekly highs at 0.6634, printed losses of 0.25%. However, as Friday’s Asian session begins, the AUD/USD exchanges hands at 0.6571, virtually unchanged as traders brace for the weekend.

Australian Dollar holds near weekly lows amid mixed global monetary policy moves

A tranche of central banks adjusted their monetary policy throughout the weekend, led by the Bank of Japan, the Reserve Bank of Australia, the Federal Reserve, the Bank of England and the Swiss National Bank. Most of them kept rates unchanged, being the outliers of the BoJ and the SNB. The former raised rates for the first time in almost two decades, while the latter was the first major central bank to cut interest rates.

Data-wise, the US economic schedule featured March S&P Global PMIs, with the services and the composite index, missing estimates but standing at expansionary territory. On a positive note, manufacturing activity accelerated to its fastest pace in almost two years. Elsewhere, the US labor market continued to show signs of tightness despite the recent withholding according to February’s Nonfarm Payrolls figures. Initial Jobless Claims for the week ending March 16 fell to 210k versus 212k the week prior.

Aside from this, market participants seem convinced they overreacted post-Federal Reserve’s decision to withhold the federal funds rate (FFR) unchanged at the 5.25%-5.50% range. The Fed Dot-Plots failed to deliver a hawkish stance, keeping three cut rates on the table for 2024, spurring a jump in interest rate cut expectations for June, which sit at around 80%.

On the Aussie’s front, the docket is empty, though proxies like the data from New Zealand would feature the Balance of Trade and Japan’s Consumer Price Index (CPI) for February.

• AUD/USD declines back down to the 0.6580s. 
• Aussie employment data and Fed meeting outcome had boosted the pair early on Thursday. 
• Upbeat US data saw AUD/USD fall back down, however, during the US session. 

AUD/USD trades back down at the lows of the day, during the US session on Thursday, after a batch of relatively strong American data helped the US Dollar (USD) claw back lost ground.

The pair had been rising after the Australian Dollar (AUD) got a boost from data showing an unexpected fall in Australian unemployment and a much higher-than-expected increase in the number of people in employment down under. 

The release of US PMI data for March, Initial Jobless Claims and the Philadelphia Fed Manufacturing Index all supported the USD and saw the pair fall back close to the day’s lows in the 0.6580s. 

US S&P Global Composite PMI came out at 52.2, holding above the 50 level that distinguishes expansion from contraction. US Manufacturing PMI came out at 52.5, beating estimates and previous figures. Services PMI, however, undershot expectations and previous results, coming out at 51.7 in March. 

The Philadelphia Fed Manufacturing Survey came out higher than estimated at 3.2, and Initial Jobless Claims at 210K were lower than the 215K forecast. 

AUD/USD rallied on Wednesday, triggered by US Dollar (USD) weakness after the Federal Reserve (Fed) March policy meeting. 

At the meeting the Fed reaffirmed they would still be cutting interest rates by roughly three quarters of a percent in 2024 despite speculation they would reduce rate cuts because of recent warmer-than-expected inflation reading. 

Early on Thursday the pair continued rising after it was revealed Australia added 116,500 new employees in February and saw its Unemployment Rate fall to 3.7% from 4.1%, according to data from the Australian Bureau of Statistics. 

The figures beat economists expectations of a 40,000 increase in employees and unemployment at 4.0%. 

The data supports the outlook for the Australian economy, is likely indicative of higher wage inflation going forward and suggests the Reserve Bank of Australia (RBA) will have to keep interest rates higher for longer. Higher interest rates are positive for currencies as they attract greater inflows of foreign capital. 

The technical picture shows the AUD/USD pair oscillating in a range between roughly 0.6480 and 0.6650. 

Australian Dollar versus US Dollar: 4-hour chart

The pair is currently turning around at the range highs and looking vulnerable to selling off. 

A continued move lower could see it return to the base of the range. Alternatively a break above the 0.6668 highs would provide confirmation of a higher high and the formation of a bullish short-term trend.

• AUD up 0.83% vs. USD after Fed holds policy steady.
• Wall Street up, praises US economy, labor strength post-Fed.
• US 10-year yield dips, Dollar Index down, hints AUD/USD rise.
• Mixed Australia PMI, strong job outlook may sway RBA policy.

The Australian Dollar soared 0.83% against the US Dollar on Wednesday as the Federal Reserve held rates steady while maintaining their monetary policy outlook from last year, with 75 basis points (bps) of rate cuts in 2024. As the Asian session begins, the pair trades at 0.6595, up 0.14%.

Aussie Dolar gains momentum amid the beginning of Asia session

Wall Street ended the session on a higher note following the Fed’s decision. The US central bank kept the Federal Funds rate (FFR) at 5.25%- 5.50% and stated that the economy and the jobs market are robust. The disinflation process had evolved, but the last two readings of the CPI and PPI justified the Fed’s rhetoric of being patient. Despite that, Fed officials stick to their three rate cuts in 2024.

Following the data, the US 10-year Treasury note yield fell one and a half basis points to 4.277%, while the Greenback got battered. The US Dollar Index (DXY), a gauge of the buck’s value against other currencies, tumbles 0.42% and sits at 103.38, aiming below the 200-day moving average (DMA), a key dynamic support level, that depicts a financial markets asset as bullish or bearish.

On the Aussies' front, the schedule featured the release of Judo Bank Flash PMI figures for March. The manufacturing PMI dipped from 47.8 to 46.8, while the Services PMI rose from 53.1 to 53.5. The Composite Index came at 52.4, up from 52.1.

AUD/USD traders’ eye further data from Australia, with the jobs market expected to add 40,000 people to the workforce. That would lower the unemployment rate, from 4.1% to 4%. A strong reading could suggest the Reserve Bank of Australia (RBA) should stick to its current stance and shrug off speculations of the first-rate cut in August.

AUD/USD Price Analysis: Technical outlook

From a technical perspective, the AUD/USD printed a leg-up, clearing key resistance levels and poised to breach the 0.6600 figure. The Relative Strength Index (RSI) confirms that statement, as it aims higher in bullish territory, with the pair closing at weekly highs, snapping four days of losses. The next supply zone would be the psychological 0.6650 mark, followed by the March 8 high at 0.6667. Once cleared, that would expose 0.6700.

• AUD/USD faces pressure amid cautious market sentiment ahead of Fed policy.
• Investors await the Fed’s dot plot and economic projections for fresh guidance.
• RBA Bullock delivers a neutral interest rate outlook.

The AUD/USD pair faces selling pressure but continues to hold the psychological support of 0.6500 in Wednesday’s late European session ahead of the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 18:00 GMT. The Aussie asset remains on the backfoot as the Australian Dollar weakens as the Reserve Bank of Australia (RBA) Governor Michele Bullock delivers neutral guidance on the Official Cash rate (OCR) after keeping it unchanged at 4.35%.

S&P 500 futures are slightly down in the late London session, portraying caution among market participants ahead of the Fed’s monetary policy announcement. The US Dollar Index (DXY) jumps to 104.10 after continuing its winning spell for the fifth trading session. 10-year US Treasury yields have dropped slightly to 4.28%, remains broadly strong ahead of Fed’s meeting.

The CME Fedwatch tool shows interest rates will remain unchanged in the range of 5.25%-5.50% for the fifth time in a row. The Fed is expected to avoid signalling any timeframe for rate cuts as inflation remains stubbornly higher than the 2% target. Consumer price inflation in February was hotter than expected due to higher food and gasoline prices. The rate cuts are appropriate only if the Fed finds inflation declining to 2% as certain.

Apart from that, Fed’s dot plot and United States economic projections will be keenly watched. The Fed’s dot plot is updated every quarter, shows interest rates projections for different timeframes. December’s dot plot indicated that policymakers see three rate cuts in 2024. The appeal for safe-haven assets would strengthen If the Fed projects fewer rate cuts this time.

• AUD/USD steady post-RBA's dovish stance and static rates.
• US housing data boosts optimism pre-FOMC decision.
• Fed policy update awaited, with eyes on interest rate forecasts.

The Australian Dollar begins Wednesday’s Asian session virtually unchanged against the US Dollar,  following Tuesday’s loss of 0.41%, after the Reserve Bank of Australia (RBA) decision. The RBA kept rates unchanged, tilting more dovish than expected. That said, the AUD/USD trades at 0.6532, almost flat.

Aussie Dollar stays firm following the central bank decision

On Tuesday, the Bank of Japan (BoJ) and the RBA announced their March monetary policy decisions. The BoJ hiked rates by ten basis points, the first in 17 years, ending the era of negative interest rates. In addition, it ended the Yield Curve Control (YCC) and its ETF buying program. The RBA softened its tone while keeping the door open for additional tightening if needed.

In the meantime, US equities ended the session in the green as the Federal Open Market Committee (FOMC) decisions loom. Data-wise, the US economic docket revealed housing data. Building Permits increased by 1.9% from 1.489 M to 1.518M, improving sharply compared to January’s data. Housing Starts rose 10.7% from 1.425M to 1.521 M.

An absent economic docket in Australia keeps AUD/USD traders waiting for the Fed’s decision. ANZ analysts commented that they expect the Fed to make no major changes to the Summary of Economic Projections (SEP). Regarding rate cuts, they noted, “We think it will cut in 25bp increments through the second half of the year, reducing the nominal Fed funds corridor by 100bp this year.”

AUD/USD Price Analysis: Technical outlook

 The AUD/USD fell below the 200-day moving average (DMA) of 0.6556, opening the door for further losses. This comes after the RBA decision, and with speculations for a Fed “hawkish” tilt, that would exacerbate a dip to 0.6500. Further losses are seen below March 5 swing low of 0.6477, and the February 13 low of 0.6442. On the upside, the 200-DMA would be the first resistance, followed by the 50-DMA at 0.6558 and the 100-DMA at 0.6586.

The Australian Dollar (AUD) has weakened following the RBA’s latest policy meeting. Economists at MUFG Bank analyze Aussie’s outlook.

RBA to begin cutting rates during the second half of this year

• AUD/USD falls sharply to 0.6500 on multiple headwinds.
• The RBA kept interest rates unchanged at 4.35% and delivered neutral guidance on interest rates.
• Investors await the Fed’s dot plot for fresh guidance on interest rates.

The AUD/USD pair faces an intense sell-off as downbeat market sentiment has weakened the appeal of risk-perceived assets. The Aussie asset falls to the psychological support of 0.6500 in Tuesday’s late European session as the US Dollar strengthens amid uncertainty ahead of the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Wednesday.

S&P 500 futures have posted significant losses in the London session, portraying a decline in investors’ risk appetite. The US Dollar Index (DXY) continues its winning streak for the fourth trading session, rises to 104.00 amid upbeat safe-haven bid. 10-year US Treasury yields have come down slightly to 4.32%. Broadly, US bond yields exhibit strength as Fed rate cut expectations for the June policy meeting have dropped due to hot inflation data for February.

The Fed’s interest rate decision will guide the next move in the US Dollar. The CME FedWatch tool shows that the central bank will keep interest rates unchanged in the range of 5.25%-5.50% for the fifth time in a row. Therefore, investors will focus mainly on the release of the dot plot and economic projections. The dot plot, updated every quarter, shows interest rate projections from Fed officials for various timeframes.

Meanwhile, the Australian Dollar weakens as the Reserve Bank of Australia (RBA) delivers neutral guidance on the Official Cash rate (OCR) after keeping it unchanged at 4.35%. RBA Governor Michele Bullock said in his policy statement that a victory on inflation cannot be announced yet. The RBA needs to be more confident that inflation is coming down to consider a rate cut.

AUD/USD plunged after the Reserve Bank of Australia (RBA) dropped its tightening bias. Economists at BBH analyze the pair’s outlook.

RBA left the cash rate target at 4.35%

• AUD/USD sees slight decline as markets gear up for the Reserve Bank of Australia's upcoming rate decision.
• US Treasury yields rise, boosting the Dollar, as anticipation builds for the Federal Reserve's policy announcement.
• The RBA is expected to hold rates unchanged amid mixed opinions among economists on the central bank's first rate cut.

The Australian Dollar begins the Asian session, clocking minuscule losses of 0.02% against the US Dollar as market participants prepare for the Reserve Bank of Australia (RBA) monetary policy decision. On Monday, the AUD/USD was virtually flat, though at the time of writing, it trades at 0.6559, down 0.01%.

Upbeat sentiment could shift amidst major central bank decisions

Wall Street finished Monday’s session in the green. US Treasury yields edged higher as investors await the Federal Reserve’s monetary policy decision, with the 10-year note benchmark up at 4.328%. Consequently, the Greenback advances 0.13%, as measured by the US Dollar Index (DXY) at 103.58.

On Monday, the US economic docket was light, with the release of the National Association of Home Builders (NAHB) Market Index for February, which improved the most since July 2023, rising by 51, up from 48 in February. The NAHG Chairman Carl Harris noted “Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year.”

Aside from this, the day's main theme is the RBA’s decision. Market players estimate the central bank would keep rates unchanged thought, there are different opinions amongst economists. Some expect the RBA will lower rates in November, while others estimate the first cut will be in September.

Given the backdrop of the Aussie economy printing mixed figures on inflation, and growth slowed to 1.5% in Q4 2023 from 2.1%, that has opened the door for easing policy. Testifying before the Australian Parliament last month, Bullock said that “inflation is being persistent, particularly in services. But it is coming down.”

ANZ Bank analysts estimate the RBA would keep a “mild tightening bias, with no change in rates. While the January labor force survey came in weak, we think the RBA (like us) is expecting payback in the February data.”

AUD/USD Price Analysis: Technical outlook

If the RBA surprises the markets with a dovish tilt, the AUD/USD can drop further below the 200-day moving average (DMA at 0.6557, exposing the 0.6500 mark. Further losses are seen at the March 5 low of 0.6477, followed by the February 13 swing low of 0.6442. On the other hand, the pair could aim higher if the RBA sticks to a hawkish message and might recoup the 0.6600 mark. The next resistance level is seen at January’s 5 cycle low, which turned resistance at 0.6640.

Economists at TD Securities discuss the Reserve Bank of Australia (RBA) Interest Rate Decision and their implications for the AUD/USD pair.

Dovish: (5%)

Base Case: Neutral (75%)

Hawkish: (20%)

• AUD/USD rises after the release of better-than-expected macroeconomic data from China, its largest trading partner. 
• Risk from China’s property sector, however, continues to undermine Iron Ore, Australia’s largest export. 
• The week promises volatility as both Australia and US’s central banks hold policy meetings.
   

AUD/USD is edging higher, trading in the 0.6570s on Monday, after the release of strong Chinese data showed higher-than-expected growth in Industrial Production, Retail Sales and Fixed Asset Investment, in February. 

The data improves the outlook for Australia’s largest trading partner but is not enough to provide an antidote to China’s property sector woes. Construction is also more influential for the Australian Dollar (AUD) because Chinese property developers are the primary buyers of Australian Iron Ore, which they use to make the steel for large-scale construction projects. 

These woes are reflected in a continued plunge in Iron Ore prices which have fallen from over $140.00 per tonne at the start of 2024 to around $102.50 at the time of publication. Iron Ore is Australia’s largest export and a fall in price translates into a decline in demand for the Australian Dollar (AUD) which is needed to purchase it. 

AUD/USD could see volatility in major week for central banks

Monday sees the start of an important week for AUD/USD in which both the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed) are scheduled to hold policy meetings, with significant implications for the exchange rate. 

The RBA will announce the outcome of its meeting on Tuesday at 03:30 GMT. Although inflation in Australia has made good progress – falling from 5.4% to 4.1% in February –  it is still far from the RBA’s target and no change in the cash rate is expected. There is a chance, however, that the bank may remove wording about the need for a further interest rate hike from the accompanying statement, according to analysts at Commerzbank, which could benefit the Australian Dollar (and AUD/USD). 

The Fed is set to announce its decision at 18:00 on Wednesday, and likewise no change in the Fed Funds Rate is predicted. Recent stickier-than-expected inflation, however, suggests the possibility the Fed’s Summary of Economic Projections (SEP) may change how many interest-rate cuts members foresee in 2024. 

In the last SEP in December, policymakers expected there to be three 0.25% cuts in 2024, however, analysts at Bloomberg expect a possibility that could fall to two in the new dot plot. Such a change would be bullish for USD (negative for AUD/USD).

• AUD/USD holds ground ahead of RBA’s policy decision on Monday.
• Chinese Retail Sales (YoY) rose by 5.5% in February, compared to the expected 5.2% and 7.4% prior.
• The correction in US Treasury yields contributes to downward pressure on the US Dollar.

AUD/USD snaps its two-day losing streak, advancing to near 0.6570 during the European session on Monday. The pair found upward support as the US Dollar (USD) retreated amid lower US Treasury yields. However, caution prevails among market participants ahead of the Reserve Bank of Australia's (RBA) policy decision scheduled for Tuesday.

The US Dollar Index (DXY) is hovering around 103.40, with the 2-year and 10-year US Treasury yields at 4.71% and 4.29%, respectively, by the press time. On Friday, increases in US yields, were driven by a hawkish sentiment surrounding the Federal Reserve. The Fed is anticipated to uphold its elevated interest rates at Wednesday’s meeting in response to recent inflationary pressures.

The Australian Dollar (AUD) might have received upward support as the S&P/ASX 200 Index recovered from its losses, although the Australian equity market faced challenges during Asian hours due to softer commodity prices.

According to Bloomberg, Westpac anticipates the Reserve Bank of Australia to maintain its cash rate at 4.35% at Tuesday's meeting. RBA Governor Michele Bullock recently highlighted that inflation in Australia is primarily "homegrown" and "demand-driven," attributed to the strength of the labor market and increasing wage inflation. The RBA does not foresee this phenomenon occurring until 2026.

Additionally, investors also await interest rate decisions from both the People's Bank of China (PBoC). Chinese Retail Sales (YoY) increased by 5.5% in February, surpassing expectations of 5.2% and the previous reading of 7.4%. Additionally, Chinese Industrial Production (YoY) rose by 7.0%, compared to the market expectation of a 5.0% figure in February and the previous reading of 6.8%.

• AUD/USD loses ground near 0.6560 in Monday’s early Asian session. 
• The RBA is anticipated to leave its key interest rate unchanged at 4.35% on Tuesday. 
• The US FOMC is likely to hold its benchmark rate at its March meeting on Wednesday as inflation remains elevated.

The AUD/USD pair trades on a negative note above the mid-0.6500s during the early Asian session on Monday. Markets are likely to trade quietly ahead of the Reserve Bank of Australia (RBA) and the US Federal Open Market Committee (FOMC) interest rate decisions on Tuesday and Wednesday, respectively. The major pair currently trades around 0.6560, down 0.01% on the day. 

The RBA is expected to hold its key interest rate at 4.35% for a third consecutive meeting at its March meeting scheduled for Tuesday. Furthermore, investors anticipate the Australian central bank to retain a mild tightening bias and see at least two rate cuts in the final quarter of 2024. The timing of RBA easing may depend on when the US Federal Reserve (Fed) begins cutting rates, which is estimated in the June meeting. However, any surprise dovish remarks from the RBA after the policy meeting might drag the Australian Dollar (AUD) lower against the US Dollar (USD).

On the other hand, the Fed is likely to maintain its monetary policy at its March meeting amid the uptick in inflation in the US. The Fed Chairman Jerome Powell warned in recent weeks about cutting interest rates too early and emphasized a “data-dependent” approach to ensure inflation returns to the 2% target firmly. 

On Friday, the preliminary US University of Michigan Consumer Sentiment Index eased to 76.5 in March from 76.9 in February, weaker than the market expectation of 76.9. Additionally, the one-year and five-year inflation expectations were unchanged at 3.0% and 2.9%, respectively.

Looking ahead, the RBA will announce its interest rate decision on Tuesday, while the Fed will announce it on Wednesday. Traders will take cues from these events and find trading opportunities around the AUD/USD pair.

• AUD/USD cycles just north of 0.6550.
• Little Aussie data to chew on leaves AUD/USD in the lurch.
• Next week: double-header showings from RBA and Fed.

The AUD/USD is churning just above 0.6550 as markets prepare for next week’s double feature from the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed). Both central banks are broadly expected to hold interest rates steady as investors focus on when rate cuts will come. According to the CME’s FedWatch Tool, money markets were recently thrown a curve ball, and bets of a June rate cut from the Fed have eased to 60%, down from 70% at the start of the week.

Next week also brings Australia’s latest labor and employment figures on Thursday, and median market forecasts expect Australia’s Employment Change in February to add 30K new jobs, while the Unemployment Rate is forecast to tick down to 4.0% from 4.1%. Preliminary Judo Bank Australian Purchasing Managers Index (PMI) figures for February are also scheduled for early Thursday.

Broader markets will be focusing full-bore on next Wednesday’s Fed rate statement, where the US central bank is also expected to update the Fed Dot Plot summary of interest rate expectations. The near-term end of the Dot Plot curve is expected to tick up to 5.5% from the current 4.6%. With markets pinning hopes on at least three 25 basis point rate cuts from the Fed in 2024, investor sentiment has been at odds with the Fed’s own rate outlook for the entire year. The Fed projected three rate cuts through 2024, while money markets priced in an eye-watering six or seven rate cuts through the year totaling nearly 200 basis points in rate trims for the year.

As the US economy continues to churn at a healthy clip and inflation remains stubbornly sticky, markets have had little choice but to slash rate cut expectations, and rate futures traders are half-heartedly hoping for a June rate cut.

AUD/USD technical outlook

AUD/USD spent most of the trading week on the low side, backsliding into the 200-hour Simple Moving Average (SMA) near 0.6580 on Thursday. The 50-hour and 200-hour SMAs have begun a bearish crossover near 0.6585 as intraday price action tilts into the bearish side. The Aussie-Dollar pair flubbed a brief bullish push into the 0.6640 early in the week.

Friday’s third of a percent decline has the Aussie clattering into the 200-day SMA against the US Dollar near 0.6560, and momentum is tilted into bear country as the pair fails to find bullish momentum after a rebound from the last swing low into the 0.6450 handle.

AUD/USD hourly chart

AUD/USD daily chart

• The Australian Dollar is hit by negative Chinese House Price data on Friday. 
• A fall in Chinese New Loans and M2 Money Supply add to the narrative of constraint. 
• AUD/USD tumbled on Thursday after US data showed inflationary tendencies in the US economy.

AUD/USD is trading almost two tenths of a percent lower on Friday, extending Thursday’s sell-off into the weekend. The pair is feeling pressure from negative Chinese housing and lending data which indicates the property sector of the world’s second largest economy is still in the eye of the storm. 

The weak Chinese data is a negative factor for the Australian Dollar which relies heavily on the Chinese market for its exports, particularly Iron Ore, which is Australia’s largest export commodity. 

The Chinese House Price Index showed a decline in house prices of minus 1.4% in February from minus 0.7% in the previous month of January, according to data from the National Bureau of Statistics of China, released early Friday. This continues the down trend in Chinese house prices since 2019.

Chinese property market woes have had a direct impact on Iron Ore prices, because the country uses so much of the ore to make the steel girders it uses in its buildings. Iron Ore prices have registered a roughly 25% drop since the start of 2024 alone. 

Other data out on Friday showed an unexpected fall in New Loans in China, in February. New Loans shrank to ㍐1,450 billion, according to data from The People’s Bank of China (Pboc). This was a decline from the 4,920 billion Yuan in January and below estimates of 1,500 billion. The data indicates less lending, which could be growth limiting, especially for the borrowing intensive property sector. 

Data showing lower-than-expected Money Supply M2, which increased by 8.7% YoY in February versus the 8.8% forecast, suggests a brake on liquidity. 

US factory gate inflation rises  

AUD/USD fell over half a percent on Thursday after the release of US macroeconomic data indicated the US economy was hotter-than-expected. 

The US Producer Price Index, which measures factory-gate price inflation, rose to 1.6%, easily beating the 1.1% expected and 1.0% previous, suggesting continued inflationary tendencies. 

Core PPI also rose by more than estimated. The data suggests the inflation will be passed on to consumers and turn up later to bug shoppers in the Consumer Price Index.

The higher inflation makes it less likely the Federal Reserve (Fed) will be in a hurry to cut interest rates. Whilst market expectations continue to see the probabilities favor a rate cut in June, the chance of a reduction in May has dwindled to virtually zero. 

Higher interest rates for longer are positive for USD because they attract more foreign capital inflows. They are negative for the AUD/USD which measures the number of Australian Dollars purchasable with one US Dollar. As such the data was negative for the pair, which declined substantially after the release on Thursday.

• The daily RSI remains in positive territory but took a big hit.
• The hourly chart shows strong selling pressure with RSI sitting in oversold territory.
• The pair may consolidate in the short term.

The AUD/USD pair is currently trading at 0.6583, suggesting a noticeable and strong downturn. Regardless of the immediate selling pressure, the broad technical outlook indicates that buyers maintain significant control over the pair. The hourly chart shows strengthening short-term bearish momentum but the selling traction may lose steam after indicators enter in oversold territory.

On the daily chart, the Relative Strength Index (RSI), despite a slight decline, is still in the positive range. The green bars in the Moving Average Convergence Divergence (MACD) show a stable positive momentum, further confirming the dominance of buyers on the larger timeframes.

AUD/USD daily chart

While the daily chart displays evidence of buying momentum, the latest RSI readings on the hourly chart present a contrasting picture with values well below 30. This implies that the AUD/USD is in oversold territory, suggesting an overwhelming dominance of sellers in the market. However, the MACD shows decreasing red bars, indicating a waning bearish momentum in the short term as the sellers might be running out of gas.

AUD/USD hourly chart

Despite the bearish momentum on the hourly chart, the broader outlook remains bullish as the pair continues to trend above the 100 and 200-day SMAs. As for now, the buyers are battling to defend the 20-day average, which in case of losing, will tilt the outlook in favor of the bears for the short term.

• AUD/USD rises ahead of key US data that could impact the pair. 
• US Producer Prices and Retail Sales are on the docket on Thursday. 
• The RBA’s relatively hawkish stance is a supporting factor for the pair. 

AUD/USD is trading in the 0.6600s on Thursday, up three hundredths of a percent in the European session, as traders await key macroeconomic data that could impact the pair.

Both US factory gate prices, or Producer Prices, and US Retail Sales are scheduled for release at 12:30 GMT. They may impact the outlook for inflation and tone the debate around when the Federal Reserve is expected to cut interest rates. 

The Producer Price Index ex Food and Energy (Core PPI), is an important inflation metric, economists expect a drop to 1.9% YoY registered in February from 2.0% in January. On a monthly basis, Core PPI is forecast to rise 0.2% versus the 0.5% advance seen in the previous month. 

The headline Producer Price Index (PPI) is forecast to show a 1.1% YoY gain versus 0.9% in January, and a 0.3% gain MoM, the same as previous. 

US Retail Sales is forecast to rebound in February, registering a 0.8% rise against the 0.8% decline in January. Higher-than-expected sales tend to spur inflation with hawkish implications for interest rate policy and a bullish impact on USD (bearish for AUD/USD).

Technical Analysis: AUD/USD in long-term downtrend

AUD/USD is in a long-term downtrend, producing lower highs and lower lows. 

Australian Dollar vs. US Dollar: Weekly chart

The AUD/USD has just pushed back after touching a major trendline and there is a risk it could fall further, in line with the longer-term downtrend. 

A break below the last swing low of October 2023 at 0.6442 would solidify the bearish outlook and probably see prices ease further to around the 0.6170 October 2022 lows. 

Alternatively, a break above the 0.6871 December 2023 high would indicate the long-term trend was probably reversing and the Australian Dollar might be set for a climb to sunnier slopes.

• AUD/USD rises as markets continue to expect the Fed to cut rates in June. 
• The RBA by contrast is striking a more hawkish tone, suggesting rates may even need to rise. 
• Iron Ore prices are a drag on AUD/USD as they tumble amidst China property slump. 

AUD/USD is trading in the lower 0.6600s on Wednesday during the US session. It is marginally up by two tenths of a percent on the day as markets continue to expect the Federal Reserve (Fed) to cut interest rates in June, despite stickier inflation data. Lower interest rates are negative for USD since they mean less foreign capital inflows. This contrasts with the Reserve Bank of Australia (RBA) which may still hike. 

From a technical perspective AUD/USD has stalled after rallying up and hitting key resistance from a long-term trendline. Overall the outlook remains bearish as the pair is in a long-term downtrend, producing lower highs and lower lows. 

Australian Dollar vs. US Dollar: Weekly chart

Despite recent gains, the mood music around the Australian Dollar remains negative due mainly to the steep fall in price of Australia’s largest export commodity, Iron Ore, which has dropped by over 20% since the start of 2024. 

Iron Ore Prices in USD

The decline has been driven by a fall in demand from its biggest export partner China, which is using less iron to make steel for its beleaguered property sector. 

Usually the Chinese government comes to the rescue when the economy takes a turn for the worse – not this time. At a meeting of the Chinese National People’s Congress on Monday, the party decided to withhold a bailout for the indebted property industry. 

Instead, China’s Communist Party seemed more interested in punishing the property magnates behind the $7.5 trillion market’s collapse, according to news.com.au.

“Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law. They will be made to pay the due price,” said Minister of Housing and Urban-Rural Development Ni Hong at the weekend.

This does not bode well for Iron Ore prices going forward or for the Australian Dollar. 

Reserve Bank of Australia split on interest rates 

Unlike the Federal Reserve, which is steadily reaching a consensus on the need for a June interest rate cut, the Reserve Bank of Australia (RBA) continues hinting it may have to raise rates even higher than their current 4.35% level. 

Inflation in Australia fell more than expected – from 5.4% to 4.1% in Q4 of 2023, but it remains well above the RBA’s target range of 2%-3%. RBA Governor Michelle Bullock stated recently that inflation in Australia is mostly “homegrown” and “demand driven”, due to the strength of the labor market and rising wage inflation. This suggests it is more entrenched than in other countries, and will take longer to fall back to target. Indeed, the RBA does not see this happening till 2026 and Bullock hinted the RBA might still need to raise interest rates to tackle inflation. 

On Wednesday, ex RBA Governor Philip Lowe said there is a two way risk on interest rates, and that the current RBA Governor Michelle Bullock was right to issue a warning that interest rates might still need to go higher.  

The contrast in central bank policy stances suggests the US Dollar may actually weaken versus the Aussie, neutralizing some of the risks to the currency from the fall in demand for Australian Iron Ore. 

Downtrend to continue?

The AUD/USD has just pushed back after touching a major trendline and there is a risk it could fall further, in line with the long-term downtrend. 

A break below the last swing low of October 2023 at 0.6442 would solidify the bearish outlook and probably see prices ease further to around the 0.6170 October 2022 lows. 

Alternatively, a break above the 0.6871 December 2023 high would indicate the long-term trend was probably reversing and the Australian Dollar might be set for sunnier slopes.

• AUD/USD demonstrates firm footing above 0.660 amid a slightly upbeat market mood.
• The Fed could revise projections for the number of rate cuts this year due to stubborn inflation data.
• Sticky inflation may keep RBA interest rates higher for a longer period.

The AUD/USD pair is up 0.13%, near 0.6615, at the time of writing in the European session on Wednesday. The Aussie asset moves higher as the US Dollar remains sideways, even though the February United States Consumer Price Index (CPI) data has prompted uncertainty over Federal Reserve (Fed) rate cuts in the June policy meeting.

S&P500 futures posted some gains in the London session, indicating a higher risk appetite among market participants. 10-year US Treasury yields fell to 4.14%. The US Dollar Index (DXY) is stuck in a tight range, slightly below 103.00, as investors reassess the likelihood of three rate cuts this year, as projected by the Fed in December.

Fed policymakers are expected to hold interest rates until they are convinced that inflation will sustainably fall to the desired rate of 2%. The consumer price inflation data released for the first two months of 2024 have not indicated signs of easing, which could force Fed policymakers to reassess their expectations for three rate cuts.

On the contrary, Fed Chair Jerome Powell said in his Congressional testimony last week that the central bank is not far from gaining conviction that inflation will return to 2%.

Meanwhile, the Australian Dollar is likely to dance to the tunes of market expectations for the Reserve Bank of Australia’s (RBA) interest rate decision, scheduled for next week. The RBA is expected to keep the Official Cash Rate (OCR) steady at 4.35%. Former RBA Governor Philip Lowe said in an interview with 9 Australia on Tuesday that stubborn inflation could force policymakers to keep interest rates higher for a longer period than what was anticipated earlier.