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- Australian Dollar extends upside on RBA hawkish hold
Australian Dollar extends upside on RBA hawkish hold
- Australian Dollar (AUD) trades on a stronger note on Wednesday amid the weaker US Dollar.
- The hawkish messages from the RBA and weaker-than-expected US Retail Sales data support the pair.
- US markets are closed for Juneteenth; US S&P Global PMI reports will be in the spotlight on Friday.
The Australian Dollar (AUD) gains momentum on Wednesday, backed by the hawkish hold by the Reserve Bank of Australia (RBA) at its June meeting. The markets have pushed back RBA rate cut expectations and see the start of the easing cycle in 2025, which continues to boost the Aussie. Furthermore, weaker-than-expected Retail Sales prompted the case for US Federal Reserve (Fed) rate cuts later this year, which undermine the Greenback across the board.
The US markets will be closed on Wednesday due to Juneteenth National Independence Day. Investors will focus on the US S&P Global Manufacturing and Services PMI reports at the end of the week. Any signs of expanding US business activity could lift the US Dollar (USD) and cap the upside for the pair.
Daily Digest Market Movers: Australian Dollar extends upside due to RBA’s hawkish hold and weaker US data
- The Reserve Bank of Australia (RBA) held the Official Cash Rate (OCR) steady at 4.35% for the fifth meeting in a row at its June meeting. It marks the longest on-hold period since May 2022, when the rate hike cycle began.
- The RBA board noted in a statement that "the economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth.”
- It would be some time yet before inflation is sustainably in the target range and the recent data had reinforced the need to remain vigilant to upside risks to inflation, according to a statement.
- The US Retail Sales increased 0.1% MoM in May following the 0.2% decline in April, missing the estimation for an increase of 0.2%, the Commerce Department reported Tuesday.
- Boston Fed President Susan Collins stated on Tuesday that there are possibilities of one or two interest rate cuts from the Fed later this year, but the central bank must be patient amid volatile readings on inflation, per Reuters.
- Richmond Fed President Thomas Barkin said on Tuesday that he needs to parse several more months of economic data before considering cutting the interest rate.
Technical Analysis: AUD/USD maintains a positive stance within symmetrical triangle pattern
The Australian Dollar trades firmer on the day. The AUD/USD pair has formed a symmetical triangle pattern since May 8. The bullish outlook prevails as the pair stays beyond the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is also supported by the 14-day Relative Strength Index (RSI), which holds in bullish territory around 54.0.
A decisive break above the upper boundary of the symmetrical descending triangle of 0.6670 will see a rally to 0.6700, the psychological level and a high of May 17. The additional upside filter to watch is 0.6760, a high of January 4.
On the downside, the crucial support level for the pair will emerge near the confluence of the 100-day EMA and the lower limit of triangle patterns at the 0.6590-0.6600 regions. Any follow-through selling will see a drop to 0.6510, a low of March 22, followed by 0.6465, a low of May 1.
Australian Dollar price today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.02% | -0.02% | -0.03% | -0.08% | 0.00% | 0.08% | 0.00% | |
| EUR | -0.01% | -0.03% | -0.03% | -0.08% | -0.01% | 0.07% | -0.01% | |
| GBP | 0.03% | 0.03% | 0.01% | -0.06% | 0.02% | 0.10% | 0.01% | |
| CAD | 0.01% | 0.03% | -0.01% | -0.06% | 0.01% | 0.10% | 0.01% | |
| AUD | 0.08% | 0.09% | 0.05% | 0.05% | 0.08% | 0.16% | 0.07% | |
| JPY | 0.00% | 0.02% | -0.03% | -0.02% | -0.08% | 0.08% | 0.00% | |
| NZD | -0.08% | -0.07% | -0.10% | -0.12% | -0.16% | -0.09% | -0.08% | |
| CHF | 0.01% | 0.02% | -0.02% | -0.01% | -0.07% | 0.00% | 0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Australian Dollar FAQs
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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