CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

• AUD/USD steady after a 0.33% gain Thursday, spurred by US GDP and rising inflation.
• Market now expects the first Fed rate cut in November, not September, based on latest economic data.
• Investors eye upcoming Australia PPI and US Core PCE figures for more market direction.

The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up. The pair traded at 0.6518, virtually unchanged.

AUD/USD reflects continued market reaction to US data

Wall Street ended Thursday’s session with losses, which usually could’ve affected the Forex markets, but it didn’t. The US Dollar is under pressure following the release of a softer-than-expected GDP report, which, coupled with a surprise on a higher Core Personal Consumption Expenditure Price Index (PCE) on a quarterly basis, spurred investors to priced out rate cuts by the Fed.

Market pricing for the Fed's first 25 basis point (bps) rate cut was pushed back from September to November.

Other US data revealed that the labor market is still solid. There were 207 K Americans filing for unemployment claims, below estimates of 214K and the previous reading of 212 K.

AUD/USD traders sent the pair sliding towards its daily low of 0.6485 before recovering some ground. As Friday’s session begins, they will be eyeing the release of the Producer Price Index (PPI) in Australia and the US Core PCE figures on a monthly basis during the North American session.

AUD/USD Price Analysis: Technical outlook

Despite registering gain for the fourth straight day, the AUD/USD remains bearishly biased, with price action at 0.6525 below the 50 and 200-day moving averages (DMAs). If bulls gather momentum and push prices above that level, up next would be the 100-DMA at 0.6585, standing on their way to 0.6600. Conversely, further weakness could drag the pair below 0.6500. This paves the way for subsequent losses, with the next key support level at 0.6442, followed by the year-to-date (YTD) low at 0.6362.

• AUD/USD falls back down below 0.6500 after US Q1 GDP data reveals persistent price pressures. 
• The pair reverses the strong rally that has characterized price action over the past week. 
• The Fed is now seen not cutting interest rates till September whilst the consensus for the RBA is November. 

AUD/USD trades back below 0.6500 on Thursday, after peaking at 0.6539 earlier in the day. The sudden decline comes after the release of US first quarter GDP data which showed persistent price pressures within the US economy despite an overall slowdown in economic growth.  

US preliminary Gross Domestic Product Annualized rose 1.7% in Q1 which was below estimates of 2.5% and the previous quarter's 3.4% reading, according to data from the US Bureau of Economic Analysis, on Thursday. 

Yet the US Dollar noted gains across the board following the data, as a key gauge of inflation in the GDP data – the preliminary Gross Domestic Product Price Index for Q1 – showed a rise of 3.1% in prices, which was substantially higher than the 1.7% of the previous quarter. 

The GDP price index data suggests stubbornly high inflation in the US economy that will probably lead the Federal Reserve (Fed) to keep interest rates higher for longer. Higher interest rates are in turn positive for USD (negative for AUD/USD) since they attract great inflows of foreign capital. 

In addition, the higher-than-expected Core Personal Consumption Expenditures in Q1, which is also a measure of inflation, showed a 3.7% rise QoQ compared to estimates of 3.4% and a previous reading of 2.0%. 

After the release of the GDP data, a first interest-rate cut from the Federal Reserve is now not seen until September 2024, carrying a 58.2% probability. 

Other relevant data for the US Dollar showed Initial Jobless Claims falling slightly to 207K from 212K when a rise to 214K had been expected, and Pending Home Sales coming in at 3.4% in March, easily beating estimates of 0.3% and February’s 1.6%. 

AUD/USD rallied strongly on Wednesday following the release of stickier-than-expected Australian Consumer Price Index (CPI) data for Q1. 

The CPI showed a 3.6% rise in Q1 instead of the 3.4% the market had expected. The price stickiness reflected in the data suggests the Reserve Bank of Australia (RBA) will be less likely to cut interest rates in the near-term. 

The RBA is still seen as the last major G10 central bank to cut interest rates, according to analysts at Rabobank. A fact, that is providing a backdraught for AUD/USD. 

The consensus is for the RBA to cut interest rates in November, however, some analysts, such as those at TD Securities have revised that view and now do not a first rate-cut until February 2025 .

• AUD/USD retreats from a peak of 0.6529 following an unexpected surge in Australian inflation figures.
• The US Dollar Index edges higher, influenced by solid US economic indicators and investor caution ahead of key GDP report.
• Despite a strong Q1 inflation report suggesting robust Australian economic activity, expectations for an RBA rate cut linger among analysts.

The Aussie Dollar finished Wednesday’s session with decent gains of 0.15% against the US Dollar, yet it retreated from weekly highs of 0.6529, which it hit after a hotter-than-expected inflation report. Economic data from the United States (US) boosted the Greenback, which, according to the US Dollar Index (DXY), gained 0.13%, up to 105.82. As the Asian session begins, the AUD/USD trades at 0.6495. down 0.02%.

AUD/USD retreats below 0.6500 amid strong US data

Wall Street was mixed on Wednesday after META reported earnings, which were better than expected but weighed on the US equity markets. Investors remain cautious ahead of the release of the US Gross Domestic Product (GDP) report on Thursday, which is expected to show the largest economy in the world grew 2.5% QoQ in the first quarter this year. At the same time, Initial Jobless Claims are expected to increase from 212K to 214K.

Aside from this, past data revealed on Wednesday suggested the US economy remains solid. Mach’s Durable Goods Orders increased 2.6% MoM, up from a 0.7% rise previously and surpassing 2.5% estimates. Core goods, which excluded transportation, increased by 0.2% MoM, an improvement over February's 0.1% increase but falling short of the 0.3% projected.

On Wednesday, during the Asian session, Australia’s Bureau of Statistics (ABS) revealed that inflation for Q1 2024 exceeded estimates by far of 0.6%, increasing QoQ by 1%. Annually based, the Consumer Price Index (CPI) expanded 3.6% YoY, down from 4.1% but above projections of 3.4%.

Traders sent the AUD/USD rallying above 0.6500 as they priced out a rate cut by the Reserve Bank of Australia (RBA) in 2024. Despite this red-hot report, ANZ Bank analysts expect the RBA to cut rates in November.

They added, "We think the RBA will want to see a couple of quarters of lower non-tradables and services inflation to be convinced that overall inflation will not only return to the 2–3% target band but remain there.”

AUD/USD Price Analysis: Technical outlook

Given the fundamental backdrop, the AUD/USD rallied toward the confluence of the 200 and 50-day moving averages (DMAs), though buyers lacked the strength to pierce that strong resistance level at 0.6526/32, retreating sharply back below the 0.6500 mark. That said, if the pair drops below the April 24 low of 0.6483, the AUD/USD could dive toward the February 13 low at 0.6442. Once cleared, up next would be 0.6400.

• AUD/USD continues its recovery after Australian Q1 CPI data shows inflation stickier-than-forecast. 
• The result is likely to keep interest rates in Australia higher for a longer time than other G10 nations. 
• Bullish reversal signs are increasing on charts, suggesting the possibility of a trend reversal in the making. 

AUD/USD trades off the highs of the day just below 0.6500 on Wednesday, after peaking at 0.6530 overnight following the release of stickier-than-expected Australian inflation data, which showed price gains were higher in Q1 than economists had predicted.  

The Q1 Consumer Price Index (CPI) data rose by 3.6% instead of the 3.4% the market had expected, and the price stickiness reflected in the data suggests the Reserve Bank of Australia (RBA) will be even less likely to cut interest rates in the near-term. 

The CPI data was a catalyst for an extension of the recovery in AUD/USD since the expectations of interest rates remaining high for longer is positive for the Australian Dollar. Higher interest rates mean more foreign capital inflows, boosting demand for AUD. 

AUD/USD leads major currencies after CPI data 

AUD/USD has seen three up-days in a row on Wednesday (so far), and it is the strongest performing G10 currency over a five-day view. 

Due to persistent inflation, of which Wednesday’s CPI data is further evidence, the RBA is seen as the last major G10 central bank to cut interest rates, according to Rabobank. This in turn is likely to provide a backwind for the Aussie Dollar. 

“Ahead of this morning’s release of Australian Q1 CPI inflation data, the market was already of the view that the RBA would be one of the last G10 central banks to cut rates this cycle. Today’s stronger than expected readings reinforces this risk and highlights Rabobank’s house view that the RBA’s forthcoming easing cycle is likely to be extremely shallow,” Rabobank said in a note on Wednesday. 

The higher-than-expected inflation rate in Q1 is likely to force the RBA to revise up its inflation forecasts at the May meeting. Taken together with the weak US PMI data on Tuesday, which dented the myth of US economic exceptionalism, Rabobank are of the view that AUD/USD will continue higher. 

“This week’s US and Australia data releases have reinforced our view that AUD/USD is likely to trend higher later in the year and into 2025.”

The RBA is now unlikely to make its first rate cut until November, says the bank. 

“Market implied policy rates are currently pointing to a very small increase in the cash rate on a 6-month view, which reflects the rise in skepticism about the ability of the RBA to cut rates at all this year. Rabobank’s view is that the RBA will cut rates only twice in the forthcoming cycle starting in November,” Rabobank said.  

An RBA cut in November now unlikely, says TD Securities 

Analysts at TD Securities go further and scrap their call for the RBA to cut interest rates in November, seeing a rate cut now not materializing till February 2025. 

“We now expect the RBA to deliver its first cut in Feb’25. The RBA is likely to adopt a more hawkish stance, but one that it's loath to act upon. Paying Aug'24 RBA OIS as insurance makes sense,” says TD Securities. 

If they are right then this is likely to fuel an even stronger rise in AUD/USD. 

AUD/USD still unlikely to rise unless US yields fall – Societe Generale

It is important to consider the other side of the AUD/USD pair too – the US Dollar.

AUD/USD will remain stuck even after the stickier Q1 data unless US yields provide a helping hand by also falling, according to analysts at Societe Generale.

“It would still take a retracement in US yields for AUD/USD to gain traction above 0.6500, even if the RBA is less likely to cut rates this year,” they comment. 

Technical Analysis: AUD/USD showing signs of a bullish reversal 

AUD/USD is showing some early technical signs that point to a possible bullish reversal. 

This is especially the case on the 4-hour and daily charts. 

The AUD/USD daily chart below shows a bullish Dragonfly Doji candlestick reversal pattern (circled) at the recent Friday April 19 lows. This was followed by a green up day on Monday, providing bullish confirmation. 

The inference is that AUD/USD is undergoing a reversal, albeit one of short duration.

AUD/USD Daily Chart  

If Wednesday ends as a green up-candle as looks likely it will provide further evidence the trend is reversing, since according to technical analysts three consecutive up-days are a sign of trend reversal. 

AUD/USD’s 4-hour chart is also showing bullish reversal insignia and it could be argued the trend in the short-term has now reversed. 

4-hour Chart 

The pair has risen above the last lower high of the downtrend at 0.6452 and has broken above the 50-4hr SMA. These are both quite bullish signs. 

In addition, the accompanying MACD, during the recovery from the April 19 lows, has been strongly bullish, rising more quickly than it fell over a similar timespan. This shows bullish enthusiasm and potentially institutional buyers could be participating. 

The MACD has also now risen above the zero line adding more bullish evidence to the argument. 

AUD/USD Weekly Chart 

The weekly chart is the least-bullish looking chart of the three. 

AUD/USD looks like it has probably formed a bearish three-wave Measured Move pattern, with waves labeled A, B and C. 

If this is the case, the pair looks to be in the middle of unfolding its C-wave. Once C is complete, price is likely to undergo a reversal or, at least, a correction.

Wave C is normally equal to the length of wave A or more conservatively a Fibonacci 0.618 ratio of A. If the latter is the case, wave C may have already completed. This would add weight to the bullish reversal thesis. 

If not, wave C probably has further to fall. Whilst finding out whether the current week ends on a bearish or bullish note will be crucial to interpreting the chart, simply going by the patterning, it seems risk of more downside is still very much alive.

Analysts at Rabobank share their short-term outlook for AUD/USD.

Fed is likely to start cutting rates in September

"Measured on a 5-day view, the AUD is the best performing G10 currency. Not only has firmer AUD price data created some unease about the RBA’s potential to cut rates, but softer US PMI data this week has provided some reassurance about the ability of the Fed to ease in the coming months. The USD has consequently fallen back against the majority of G10 currencies."

"In Rabo’s view, the Fed is likely to start cutting rates in September. This suggests the prospect of a softer USD from the summer. This week’s US and Australia data releases have reinforced our view that AUD/USD is likely to trend higher later in the year and into 2025. However, near-term the AUD/USD may find it difficult to extent this week gains. This is likely to depend on the releases of US GDP and PCE inflation later this week. The 200 days Simple Moving Average (SMA) is likely to offer resistance at AUD/USD 0.6529."

• AUD/USD extends gains, influenced by disappointing S&P Global PMIs from the US, suggesting possible Fed easing.
• US Dollar weakens as Treasury yields fall and equity markets respond positively to the potential shift in Fed policy.
• Upcoming Australian CPI data could influence the Reserve Bank of Australia's policy stance.

The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table, following last week's hawkish rhetoric. The AUD/USD trades at 0.6488, up by 0.01% as Wednesday’s Asian session begins.

Aussie Dollar capitalizes softer US PMIs amid increasing Fed rate cut hopes

S&P Global revealed that manufacturing activity in the US contracted slightly to 49.9, down from 51.9 in March. The Services and Composite PMIs cling to expansionary territory, but both fell from 51.7 to 50.9 and from 52.1 to 50.9.

Following the data, US equities rose, US Treasury yields fell, and the Greenback posted losses. The US Dollar Index (DXY), which tracks the buck’s performance against the six other currencies, dropped 0.44% and stayed at 105.68.

The AUD/USD rose from daily lows around 0.6440s toward the day’s high at 0.6490.

Other data shows that New Home Sales surged to a six-month high, indicating robust demand in the housing market. However, Building Permits continued to show contraction, albeit with a slight improvement, as the initial decline of -4.3% was revised to -3.7%.

On the Aussie’s front, the Consumer Price Index (CPI) for the first quarter is expected to edge lower, from 4.1% to 3.4% YoY. On a quarterly basis, it is expected to tick higher from 0.6% to 0.8%, while monthly figures are foreseen to remain unchanged at 3.4%.

ANZ analysts commented that the Reserve Bank of Australia wouldn’t likely change their stance, noting, “Looking ahead to the next RBA Board decision on 7 May, we don’t think slightly higher inflation than the RBA is expecting will prompt a shift back to an overt tightening bias.”

AUD/USD Price Analysis: Technical outlook

From a technical perspective, the AUD/USD turned bullish in the short term, following the formation of a ‘morning star’ chart pattern, but downside risks look. Buyers need to clear the 0.6500 hurdle and surpass the confluence of the 50 and 200-day moving averages (DMAs) at 0.6527/32, which formed a ‘death cross.’ If cleared, that would extend the rally to 0.6600. On the other hand, a reversal and a daily close below 0.6440, could pave the way to re-test year-to-date (YTD) lows of 0.6362.

• AUD/USD is showing technical bullish reversal signs. 
• The question is, are they enough to indicate a chance of a reversal of the trend?
• Daily, 4-hour and Weekly charts are analyzed to weigh up the evidence. 

“The trend is your friend,” traders like to say, and AUD/USD is in a downtrend overall. 

At the same time it is showing some early technical signs – here and there – that point to a possible bullish reversal. 

What are these signs and are they enough to suggest a reversal of the trend and the birth of a new bull trend in AUD/USD?

Early bullish clues?

The bullish signs are particularly clear on the short and intermediate term charts – or the 4-hour and daily timeframes. 

The AUD/USD daily chart below, used to analyze the intermediate-term trend, is showing a bullish Dragonfly Doji candlestick reversal pattern (circled) at the recent Friday April 19 lows. This was followed by a green up day on Monday, which provides added bullish confirmation. 

The inference from these candlesticks is that AUD/USD is undergoing a reversal, albeit one of short duration. 

AUD/USD Daily Chart

Also on the daily chart, the Moving Average Convergence/Divergence is converging slightly with price when comparing the February 13 low with the April 19 low. Although price is drastically lower in April, the MACD is actually slightly higher when compared to the MACD in February, suggesting a lack of bearish momentum underpins the most recent sell-off. This is sometimes an early warning sign a bear trend is ending. 

Bearish counter-arguments

There are no other signs the intermediate trend is reversing. Price is still under the three major moving averages – the 50-day, 100-day and 200-day Simple Moving Averages (SMA), which is a bearish sign. 

Nor has it broken above the April 11 high at 0.6563, the last lower high of the downtrend on the daily chart, a further requirement to be confident the trend was reversing.  

Additionally, although the sell-off in April lacks momentum it is very steep, and this steepness probably indicates more downside before the downtrend ends. 

Analyzing the short-term trend

AUD/USD’s 4-hour chart which is used to assess the short-term trend, is also showing some bullish reversal insignia, though still nothing definitive.  

AUD/USD 4-hour Chart 

The pair has risen above the last lower high of the downtrend at 0.6452 and has broken above the 50-4hr SMA. These are both quite bullish signs. 

In addition, the accompanying MACD, during the recovery from the April 19 lows, has been strongly bullish, rising more quickly than it fell over a similar timespan. This shows bullish enthusiasm and potentially institutional buyers could be participating. 

MACD has also crept above the zero line on Tuesday, adding more bullish evidence to the argument. 

AUD/USD Weekly Chart

Finally we look at the weekly chart to assess the long-term trend. This is the least-bullish looking chart of the three. 

AUD/USD looks like it has probably formed a bearish three-wave Measured Move pattern, with waves A, B and C shown labeled. If so, the pair looks to be in the middle of unfolding its C-wave. Once C is complete, price is likely to undergo a reversal or, at least, a correction.

Wave C is normally equal to the length of wave A or more conservatively a Fibonacci 0.618 ratio of A. If the latter is the case, wave C may have already completed. This would add weight to the bullish reversal thesis. 

If not, wave C probably has further to fall. Going by the patterning on the chart this looks more likely to be the case and continues to tip the balance in favor of the bearish case overall. 

• AUD/USD climbs over 0.54%, reaching 0.6449, buoyed by gains in Wall Street and a flat US Dollar.
• Australian manufacturing activity nears expansion with April's Judo Bank Manufacturing PMI rising to 49.9.
• Busy week ahead for US economic data, including PMIs and GDP, expected to influence AUD/USD direction.

The Aussie Dollar began the week on the front foot and registered gains against the US Dollar on Monday, gaining more than 0.54% as risk appetite improved. As the Asian session begins, the AUD/USD trades at 0.6449, up 0.01%.

AUD/USD nears 0.6450 boosted by positive Australian data and lower US Treasury yields

Wall Street finished the session with gains, while US Treasury yields edged lower. The Greenback finished the session flat, though the AUD/USD bounced off yearly lows, shy of the 0.6450 area.

Data from Australia revealed that manufacturing activity in April improved. The Judo Bank Manufacturing PMI came at 49.9, up from 47.3, at a tick of expansion. The Services PMI cooled from 54.4 to 54.2, though it expanded at the fastest rate in two years.

In the meantime, data from the United States featured the Chicago Fed National Activity Index (CFNAI), which rose by 0.15 in March from 0.09 in February. The index’s three-month moving average increased from -0.28 in February to -0.19 in March.

What’s ahead for AUD/USD traders?

This week, the economic docket in the United States (US) will be busy. It will feature S&P Global PMIs, housing data, Durable Goods Orders, and the GDP for the first quarter of 2024. That, along with the release of the Fed’s preferred gauge for inflation, the March Personal Consumption Expenditure (PCE) Price Index, will dictate the direction of the AUD/USD.

• AUD/USD trades marginally higher versus the USD on easing Middle East tensions. 
• Higher commodity prices, especially amongst metals of which Australia exports are also supportive. 
• Aussie CPI data for Q1 and US PCE inflation data are likely to be the main movers in the week ahead. 

AUD/USD is trading higher in the 0.6430s at the start of the week as Middle East tensions ease and commodities hold their value. 

The Australian Dollar (AUD) tends to decline during periods of uncertainty, unlike the US Dollar (USD) which has safe-haven qualities, so the unwinding of geopolitical risk helps AUD more than USD.

Israel’s counter-attack against Iran led to a sudden spike in the fear index on Friday and a resulting new low for April in AUD/USD at 0.6362. The Israelis fired a warning shot at a nuclear facility near Isfahan. The strike could have set off a thermonuclear explosion but in the end didn’t, and Iran has not retaliated. As a result, markets have settled back down on Monday, leading to renewed upside for the Aussie. 

US Dollar stronger in most pairs 

The US Dollar remains strong in most pairs despite the fall in safe-haven flows. This is due to the fact that markets expect data out of the United States this week to show continued economic growth. 

“The US preliminary April PMIs (Tuesday), Q1 GDP (Thursday) and March Personal Income and Outlays report (Friday) are expected to back American economic exceptionalism,” says Brown Brothers Herriman in a note on Monday, adding, “Overall, as long as US economic activity remains solid, the cyclical USD uptrend is intact.”

The most important release will be Friday’s US Personal Consumption Expenditure (PCE) data for March, including the Federal Reserve’s (Fed) preferred gauge of inflation, the Personal Consumption Expenditure – Price Index. 

If PCE inflation in the United States (US) registers a higher-than-expected rise it will boost USD/JPY, by suggesting an even longer delay before the Fed reduces interest rates. If interest rates remain higher for longer it increases demand for USD from foreign investors looking to park their capital. 

Australian exceptionalism

AUD/USD is fairing better than most USD pairs partly because commodities, which Australia is a major exporter of, are holding their value better than expected. 

“The ongoing squeeze in global commodity prices are helping shield the Aussie somewhat on crosses. The LME’s base metals index rose 5.3% last week taking its gains so far in April to 14%,” says Richard Franulovich, Head of FX Strategy, at Westpac. 

The supportive effect may not last, however, since Iron Ore, which is Australia’s largest export, could be peaking and about to roll over. 

“Iron ore markets showed some signs of peaking after the sharp ru up through April. The May SGX contract is up $1.15 from the same time Friday at $115.90 while the 62% Mysteel index is down 35c at $116.90,” says Westpac. 

Chile has increased tariffs on Chinese steel and in the US President Biden is calling for higher tariffs to prevent Chinese steel from flooding the market and pricing out the competition. Australia is a major supplier of Iron Ore to China for its steel production so a trade war or higher tariffs could hit Australian exports, and the Aussie Dollar. 

“In a sign that close to record Chinese steel exports is pressuring steel producers around the world, Chile slapped anti-dumping tariffs on Chinese steel products with a 33.5% import tax on steel balls and 24.9% on steel bars. The move follows US President Biden last week calling on the USTR to triple the tariff on Chinese steel,” adds Westpac. 

Australia to publish Inflation data 

The major release for AUD in the week ahead is Australian Consumer price Index (CPI) data for the first quarter of 2024, out on Wednesday, April 24. 

Analysts expect Q1 CPI to rise 0.8%, compared to 0.6% in Q4, though base effects will see the annual pace easing to 3.4%, from 4.1%. 

“Westpac’s forecast for the trimmed mean is 0.8% for the quarter, taking the annual pace from 4.2% YoY to 3.8% YoY, the slowest since March 2022, says Richard Franulovich. 

The Reserve Bank of Australia (RBA) is not expected to cut rates before the Federal Reserve (Fed) which is another supportive factor for the AUD/USD. Relatively higher interest rates support currencies since they encourage more capital inflows. Whilst the RBA has set base interest rates at 4.35% against the Fed’s 5.25%-5.50%, favoring the US Dollar overall, whether or not the differential widens or closes is a key factor for AUD/USD’s valuation. 

Current market expectations are for the RBA to cut interest rates in December after the Fed cuts in September/November, according to Westpac’s Franulovich. This is supporting AUD/USD since the differential is expected to narrow. 

However, Wednesday’s Aussie CPI data could be key in this regard since, “A softer than consensus Q1 CPI could galvanize the potential for RBA rate cuts before the Fed,” says the Westpac analyst, which would translate into further downside for the AUD/USD.

• AUD/USD holds below 0.6450 in Monday’s early Asian session. 
• The hawkish comments from Fed officials in recent weeks have lifted the Greenback. 
• The moderate Australian inflation data and the continuously tight labour market could prompt RBA rate cuts this year. 

The AUD/USD pair remains on the defensive near 0.6420 during the early Asian session on Monday. The Federal Reserve (Fed) media blackout went into effect at midnight Friday. Nonetheless, the US central bank has delivered hawkish messages in recent weeks and markets expect the first cut in September. 

On Friday, Chicago Fed President Austan Goolsbee said that inflation progress had “stalled and the Fed’s current restrictive policy is appropriate. Meanwhile, Atlanta Fed President Raphael Bostic, one of the most hawkish members of the FOMC, stated that the US central bank wouldn’t cut rates until the end of the year. The chance of a June cut has fallen below 20% and the odds of a July cut have dropped below 50%. A September cut is not fully priced in, with the probability falling below 90%, according to the CME FedWatch Tool. 

The hawkish stance from Fed officials in recent weeks provides some support to the US Dollar (USD) and creates a headwind for the AUD/USD pair. Investors will take more cues from the US inflation data this week. The final reading of the US March Personal Consumption Expenditures Price Index (PCE) will be due on Friday. Headline PCE inflation is estimated to rise to 2.6% YoY, while the core is expected to fall a tick to 2.7% YoY. 

On the Aussie front, inflation is still above the Reserve Bank of Australia’s (RBA) target but continues to moderate in line with the RBA’s latest forecasts. The continuously tight labor market could prompt those calling for an RBA rate reduction before the end of the year, which might drag the Australian Dollar (AUD) lower against the Greenback. The Australian Consumer Price Index (CPI) on Wednesday will be a closely watched event. Investors may push back the expected timing of rate cuts if the inflation data is hotter than expected, which might cap the downside of the AUD/USD pair. 

• AUD/USD clings to gains above 0.6400 as market sentiment improves.
• The appeal for risky assets improved after reports from Iran indicated that the attack in Isfahan was exaggerated.
• Weak Australian Employment data positively influence speculation for early RBA rate cuts.

The AUD/USD pair holds gains above the round-level support of 0.6400 in Friday’s early New York session. The Aussie asset recovers as fears of further escalation in Middle East tensions ease after Iran reported that the drone attack did not harm nuclear facilities in Isfahan. Also, the attack from Israel, which has not been confirmed by them but by US officials appeared to be limited in size.  Meanwhile, Iran said that they have no plans for an immediate retaliation.

Market sentiment turns upbeat as the appeal for risky assets improves. The S&P 500 witnesses buying interest at open and recovers losses posted in the European session. 10-year US Treasury yields fall to 4.62% even though Federal Reserve (Fed) policymakers have been endorsing higher interest rates for a longer period.

Fed policymakers have been arguing that they are comfortable with higher interest rates because labor demand is robust and wages are rising. They have warned that the progress in inflation declining to the 2% target is lower than expected.

The US Dollar Index (DXY) whipsaws around 106.00 as the appeal for risk-perceived assets improves. The near-term outlook of the US Dollar is still strong due to upbeat United States economic prospects.

Meanwhile, weak Australian Employment data for March has strengthened speculation for early rate cuts by the Reserve Bank of Australia (RBA). According to the Australian Bureau of Statistics, employers fired 6.6K workers against expectations of fresh 7.2K hiring. In February, 117.6K job-seekers were hired, which was slightly revised higher from 116.5K. The Unemployment Rate rose to 3.8% from 3.7% but remained below the estimates of 3.9%.

• AUD/USD falls following hawkish signals from Fed officials, emphasizing no immediate rate cuts.
• US economic indicators strengthen, with the Philadelphia Fed Manufacturing Index hitting a new high since April 2022.
• Australian employment data disappoints, with job losses and a slight increase in the unemployment rate casting shadows over RBA forecasts.

The Aussie Dollar is on the defensive against the US Dollar, as Friday’s Asian session commences. On Thursday, the antipodean clocked losses of 0.21% against its counterpart, driven by Fed officials emphasizing they’re in no rush to ease policy. The AUD/USD trades at 0.6419 at the time of writing.

AUD/USD slumped on Fed officials’ comments

A reflection of that was Wall Street’s finishing in the red. On Thursday, Atlanta’s Fed President Raphael Bostic was hawkish, questioning that they could not be able to cut rates towards the end of the year. His colleague, John Williams from the New York Fed, said that the current policy is in a good place and that patience is required before lowering rates. Although he doesn’t consider hiking rates as his base scenario, he added the Fed would raise them if needed.

US data revealed that manufacturing activity is gaining steam. The Philadelphia Fed Manufacturing Index experienced a significant increase, jumping to 15.5, far surpassing the modest expectation of 1.5, its highest level since April 2022. In the jobs market, Initial Jobless Claims for the last week were unchanged at 212K, while Continuing Claims edged up to 1.812 million, below estimates.

Given the solid fundamental backdrop, traders had priced in two rate cuts by the Fed for 2024. Data from the Chicago Board of Trade (CBOT) shows investors project the Federal funds rate (FFR) to end at 5.07%.

On the Aussie front, jobs data declined by 6.6K in March, missing estimates, while the unemployment rate edged up from 3.7% to 3.8%. According to ANZ Analysts, “the labour market may be running slightly hotter than the RBA forecast at the time of its February Statement on Monetary Policy. The RBA was forecasting employment growth to slow to 2.0% y/y and the unemployment rate to reach 4.2% by the end of the June quarter this year.”

AUD/USD Price Analysis: Technical outlook

The AUD/USD has shifted bearishly after the exchange rate fell below the latest cycle low of 0.6442 on February 13, the previous year-to-date (YTD) low. Hence, a continuation is expected, but sellers must surpass the 0.6400 mark. A breach of the latter will expose the November 10, 2023, daily low of 0.6338 an intermediate support level, followed by a major cycle low printed on October 26, 2023, at 0.6270. On the other hand, buyers need to push prices toward the 0.6500 figure, if they would like to remain hopeful of higher prices.

• AUD/USD recovers marginally after the recent steep sell-off. 
• Both the Fed and RBA are expected to delay cutting interest rates now.
• This means the interest rate differential, a key driver of FX, is unlikely to widen as much as in other pairs. 

AUD/USD climbs about a tenth of a percent into the 0.6440s on Thursday, continuing the correction of the steep sell-off in the pair at the start of April. 

As can be seen from the chart below, an overall bearish tone dominates price action after the new year-to-date low made on Tuesday at 0.6389. 

AUD/USD Daily Chart 

The most recent leg down, which started on April 10, was driven by a sudden strengthening in the US Dollar (USD). 

A run of strong macroeconomic data from the US, a solid labor market and persistently high inflation means the US Federal Reserve (Fed) cannot go ahead and cut interest rates as soon as it had been planning. 

The expectation of interest rates remaining higher for longer in the US in order to continue cooling down the economy, has supported the US Dollar because higher interest rates attract greater inflows of foreign capital. 

The sell-off in AUD/USD was not as steep as in other Dollar pairs, however, because stubbornly high inflation in Australia means the Reserve Bank of Australia (RBA) is also expected to delay cutting interest rates. It was less vocal about cutting them at the start of the year, however, unlike the Federal Reserve (Fed). 

In Australia, a similar delay means the Reserve Bank of Australia (RBA) is now not expected to lower the 4.35% overnight cash rate until November 2024. 

“Markets currently price the RBA cash rate to be unchanged at the next meeting on 7 May, with a 60% chance of a cut by November,” said Westpac in a recent note. 

There has been a surprising down shift in the number of cuts the RBA is expected to make in 2024 over the past month, which mirrors what has happened in the US with the Fed. 

“The market is pricing in 90% odds of a 25 bp rate cut in 2024 vs. almost 50 bp of total easing that was seen earlier this month,” according to BBH. 

The main macroeconomic data to come out of Australia over the last few sessions was the Australian Bureau of Statistics Labour Force Survey (LFS). 

This showed employment down by 6.6k (from plus 117.6k in February), the Unemployment Rate rising to 3.8% (from 3.7%) and the Participation Rate at 66.6% (from 66.7%). 

The data failed to move the dial with regards to the Aussie Dollar. 

“It provided a slightly better read on the underlying state of labour market conditions over the opening quarter,” according to Westpac. 

Even though the Unemployment Rate rose to 3.8%, it is still below the RBA’s estimated full employment range of 4.0% - 5.75%, so is unlikely to impact their policy decisions in the near term, and therefore the Australian Dollar. 

• AUD/USD is buoyed by an improved risk sentiment and a sluggish US economic calendar.
• Wall Street opens higher, influencing currencies despite a slight increase in the US Dollar Index.
• Upcoming Australian employment data could impact AUD strength, with forecasts suggesting modest job growth.

The Australian Dollar makes a U-turn and rises against the US Dollar in early trading during the North American session, gaining 0.33% amid an improvement in risk appetite. A scarce economic calendar in the United States (US) and hawkish comments from Federal Reserve Chair Jerome Powell failed to boost the Greenback. The AUD/USD trades at 0.6423.

AUD/USD gains despite hawkish Fed comments; focus on Australian jobs data

Wall Street is setting the tone, opening with gains. US Treasury yields tumble but do not undermine the buck, which stays firm, as depicted by the US Dollar Index (DXY). The DXY is up 0.11%, at 106.24.

US data revealed during the week showed that American consumers remain resilient while Industrial Production stands tall. On the negative front, US Building Permits and Housing Starts plunged due to higher mortgage rates. The Mortgage Bankers Association (MBA) revealed that rates for 30-year mortgages edged up from 7.01% to 7.13%.

In addition to the data, Fed Chair Jerome Powell said that the lack of progress on inflation would likely require keeping rates steady for “as long as needed.” The markets perceived Powell as hawkish, though Wednesday’s price action suggests the opposite.

In December 2023, the Fed revealed in its projections that most officials expected to cut rates three times due to the evolution of the disinflation process. Nevertheless, three months of higher inflation than expected via the Consumer Price Index (CPI) sparked Powell’s tilt and a repricing of fewer rate cuts than foreseen.

On the Australian front, it would feature the release of jobs data. The Employment Change is expected to add 7.2K jobs to the workforce, well below the 116.5K created in February, while the Unemployment Rate is foreseen to edge close to 4%. If the data comes weak, that would warrant a more accommodative policy by the Reserve Bank of Australia. Hence, AUD/USD traders could push the pair lower.

AUD/USD Price Analysis: Technical outlook

Despite recovering, the AUD/USD is bearishly biased, and it would require buyers to achieve a daily close above the February 13 low of 0.6442. Otherwise, the pair's first support would be the 0.6400 mark, followed by the April 16 daily low of 0.6389. The next support would be 0.6350, followed by the 0.6300 mark.

• AUD/USD recovers from 0.6400 amid improved market sentiment.
• The Aussie Employment data will guide market expectations for RBA rate cuts.
• It is forecasted that Australian employers hired mere 7.2K workers in March.

The AUD/USD pair finds a cushion near the round-level support of 0.6400 in Wednesday’s early American session. A three-day losing spell in the Aussie asset has concluded for now as investors expect that nations other than the United States are also facing stubborn inflation issues.

The Consumer Price Index (CPI) data for the United Kingdom and the New Zealand economies released in Wednesday’s session indicated that the last mile for inflation to return to the 2% target is bumpy. UK’s inflation softened slower than estimated in March while NZ inflation grew as expected in the first quarter of 2024.

This has forced traders to reprice their expectations for initial rate cuts. For the Bank of England (BoE) and the Reserve Bank of New Zealand (RBNZ), investors are now expecting that they will pivot to rate cuts from the November meeting instead of September.

Meanwhile, the market sentiment has improved. Considering bullish overnight futures, the S&P 500 is expected to open on a positive note. 10-year US Treasury yields fall slightly to 4.64% after refreshing a five-month high at 4.7%. The US Dollar Index (DXY) turns sideways after printing a fresh five-month high at 106.40. The US Dollar holds strength as Federal Reserve (Fed) Chair Jerome Powell leaned for keeping interest rates higher for a longer period as inflation data for March was not encouraging.

On the Australian Dollar front, investors await the Employment data for March, which will be published on Thursday. The Unemployment Rate is forecasted to have increased to 3.9% from 3.7% in February. In the same period, Australian employers are estimated to have hired 7.2K workers, significantly lower from 116.5K. Weak employment numbers would lift expectations for rate cuts by the Reserve Bank of Australia (RBA).

• AUD/USD slips to 0.6400 amid Middle East tensions, faded speculation for Fed rate cuts.
• Fed Daly sees no urgency for rate cuts with high inflation and a strong labor demand.
• The Chinese economy has exhibited a strong footing in the first quarter of this year.

The AUD/USD pair slumps to near the round-level support of 0.6400 in Tuesday’s early American session. The Aussie asset has extended its losing streak for the third trading session on Tuesday as the broader market mood is risk-averse due to worsening Middle East tensions and expectations that the Federal Reserve (Fed) will delay rate cut plans to later this year.

Risk-sensitive currencies have come under pressure as escalating Middle East tensions are expected to disrupt global supply chain. The Israeli military is anticipated to retaliate to Iran for its airstrikes on their territory. Meanwhile, US President Joe Biden said that he wont support the counterattack from Israel.

10-year US Treasury yields jump further to 4.68% as speculation for the Fed reducing interest rates in the June and July policy meeting have receded. Robust US Retail Sales data for March has reinforced expectations that there will be no urgency from the Fed for rate cuts.

San Francisco Fed Bank President said on Monday that “There is "no urgency" to cut US interest rates.” With inflation remaining hot and demand for labor remains strong, the Fed is expected to maintain a restrictive interest rate stance until it gains confidence that inflation will sustainably return to the desired rate of 2%.

In the Asian region, stronger-than-anticipated China’s Q1 Gross Domestic Product (GDP) data failed to improve the market sentiment. In the first quarter of this year, the Chinese economy strongly expanded by 1.6% from 1.2% in the last quarter of 2023, revised higher from 1.0%. The Australian Dollar is expected to get benefitted by China’s improving economic outlook.

On the domestic front, the Australian Dollar will be guided by the Employment data for March, which will be published on Thursday. The Unemployment Rate is forecasted to have increased to 3.9% from 3.7% in February. In the same period, Australian employers are estimated to have hired 7.2K workers, significantly lower from 116.5K.

• Aussie Dollar falls to 0.6452 after higher-than-expected US Retail Sales show strong consumer activity.
• Rising US Treasury yields suggest diminishing hopes for Federal Reserve rate cuts,  shifting market expectations.
• Middle East tensions and forthcoming Chinese economic data will shape AUD/USD's short-term path.

The Aussie Dollar extended its losses against the Greenback during the North American session, dropping some 0.08% after hitting a daily high of 0.6493. The AUD/USD trades at 0.6452 following the release of strong US Retail Sales data.

Australian Dollar weakens as robust US economic data dampen rate cut expectations

The US Department of Labor revealed that Sales in March smashed estimates of 0.4% and rose by 0.7% MoM. At the same time, Retail Sales in the control group– used to calculate the Gross Domestic Product (GDP) – jumped from 0.3% in February to 1.1% MoM in March, crushing forecasts of a 0.4% expansion.

Following the data, US Treasury yields soared, a reflection that investors expected fewer interest rate cuts by the Federal Reserve. Data from the Chicago Board of Trade (CBOT) shows traders expecting two rate cuts instead of three toward the end of the year, an indication that rates would end at the 4.75%-5.00% range.

Other data showed that the National Association of Home Builders (NAHB) Housing Market Index remained unchanged at 51 in April due to mortgage rates standing at 7%. NAHB Chairman Carl Harris said, "April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed.”

Risk appetite is significantly impacting the AUD/USD, courtesy of tensions arising in the Middle East. The recent offensive by Iran against Israel, which finished without casualties, has underscored the potential volatility in the region and its potential impact on the AUD/USD.

Earlier, New York Fed President John Williams commented that he expects the US central bank to begin to ease policy in 2024 while emphasizing that current policy is restrictive. Regarding the robust retail sales data, he added that strong fundamentals are driving consumer spending.

The lack of economic data from Australia, would keep investors focused on upcoming Chinese data. China’s schedule would feature Industrial Production, GDP, and Retail Sales. If the data proves to be weak, it could undermine the prospects of the AUD/USD and open the door to test 0.6400.

AUD/USD Price Analysis: Technical outlook

The daily chart confirms the AUD/USD is bearishly biased, with traders eyeing a clear break of the February 13 low of 0.6442, once cleared, would refresh yearly lows and open the door to challenge 0.6400. Further downsides are seen below that level, like the November 10, 2023, low at 0.6336. On the other hand, if buyers lift the AUD/USD past 0.6450, look for an impulse move toward 0.6500.

• AUD/USD stages a modest recovery from a two-month low touched on Friday.
• The uptick seems unaffected by the Iranian attack on Israel over the weekend.
• Reduced Fed rate cut bets favor the USD bulls and should cap gains for the pair.

The AUSD/USD pair attracts some buyers on the first day of a new week and recovers a part of Friday's losses to the 0.6455 area, or its lowest level since February 14. Spot prices, meanwhile, react little to the latest geopolitical developments and trade around the 0.6470-0.6475 region during the Asian session, though any meaningful appreciating move still seems elusive. 

Iran launched explosive drones and missiles at Israel late on Saturday in retaliation for a suspected Israeli attack on its consulate in Syria earlier this month, raising the risk of a further escalation of conflicts in the Middle East. The markets, however, remain relatively calm, which is evident from a generally positive tone around the US equity futures and turns out to be a key factor lending some support to the risk-sensitive Australian Dollar (AUD). The US Dollar (USD), on the other hand, stands tall near its highest level since early November amid hawkish Federal Reserve (Fed) expectations and caps the upside for the AUD/USD pair. 

Data released from the US last week did little to ease concerns about still-sticky inflation and reinforced market expectations that the Fed will delay cutting interest rates this year. Adding to this, comments by a slew of influential FOMC members forced investors to push back their expectations for the first rate cut to September from June. The outlook keeps the US Treasury bond yields elevated near the YTD peak touched last week, which, along with persistent geopolitical tensions, should underpin the safe-haven Greenback. This, in turn, warrants some caution before confirming that the AUD/USD pair has bottomed out in the near term. 

Moving ahead, the market focus now shifts to the US economic docket – featuring the release of monthly Retail Sales figures and the Empire State Manufacturing Index. This, along with Fedspeak and geopolitical developments, will drive the USD demand and provide some impetus to the AUD/USD pair ahead of the Chinese macro data dump during the Asian session on Tuesday. Investors this week will also take cues from Fed Chair Jerome Powell's appearance and the release of Australian employment details on Thursday.

• AUD/USD meets with a fresh supply on Friday and drops back closer to the weekly low.
• Weaker Chinese trade data undermine the Aussie amid strong follow-through USD buying.
• The technical setup favours bearish traders and supports prospects for additional losses.

The AUD/USD pair comes under some renewed selling pressure on Friday and extends its steady intraday descent through the early part of the European session. Spot prices touch a fresh daily low following the release of weaker Chinese trade data, albeit manage to hold above the 0.6500 psychological mark and rebound a few pips in the last hour.

Any meaningful recovery, however, still seems elusive in the wake of strong follow-through US Dollar (USD) buying, bolstered by expectations that the Federal Reserve (Fed) will keep interest rates higher for longer amid sticky US inflation. Apart from this, persistent geopolitical tensions stemming from conflicts in the Middle East benefit the safe-haven Greenback and might further contribute to capping the risk-sensitive Aussie.

From a technical perspective, the AUD/USD pair, so far, has managed to defend the 0.6500 mark, which should now act as a key pivotal point. Given that oscillators on the daily chart have just started gaining negative traction, a convincing break below will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent sharp pullback from the 0.6645 area, or a one-month high touched earlier this week.

Some follow-through selling below the 0.6480 area, or the monthly low, will reaffirm the negative bias and allow the AUD/USD pair to aim back to challenge the YTD trough, around the 0.6445-0.6440 region touched in February. The downward trajectory could extend further towards the 0.6400 mark en route to the next relevant support near the 0.6355-0.6350 zone.

On the flip side, any attempted recovery is likely to confront stiff resistance near the 0.6545-0.6555 region, which coincides with the very important 200-day Simple Moving Average (SMA). This is followed by the 100-day SMA, currently pegged near the 0.6600 mark, above which a bout of a short-covering move has the potential to lift the AUD/USD pair back towards the 0.6640-0.6645 area, or the monthly swing high.

AUD/USD daily chart