Australian Dollar retreats from the weekly highs, focus on US Core PPI

• Australian Dollar pulls back from weekly highs ahead of the US Core PPI.
• Australia’s RBA is expected to increase interest rates; contributing support for the Aussie Dollar.
• The slew of dovish remarks by Fed officials contribute to pressure on the US Dollar.

The Australian Dollar (AUD) attempts to snap the winning streak that began last week on a downbeat US Dollar (USD). The AUD/USD pair is strengthening as the likelihood of another interest rate hike by the Reserve Bank of Australia (RBA) increases. This trend can be linked to growing inflation expectations fueled by higher oil prices.

Australia might witness robust underlying commodity prices owing to the ongoing conflict in the Middle East. Additionally, Westpac Consumer Confidence data for October indicates an improvement in individual confidence during the same period.

Australia's business conditions showed resilience in September despite a deceleration in inflation. Moreover, Consumer Sentiment rebounded in October with unchanged rates, but the overall sentiment remained overshadowed by the rising cost of living.

The US Dollar Index (DXY) loses its ground to extend losses that began last week. The US Dollar (USD) faced a challenge despite a minor recovery in US Treasury yields on Tuesday.

Furthermore, a series of dovish-leaning comments from Fed policymakers have resonated in the markets, with many expressing worries that elevated long-term US bond yields might hinder their inclination to raise rates in the upcoming meetings.

Daily Digest Market Movers: Australian Dollar extends gains on RBA interest rate trajectory

• Australia experienced a rebound in inflation in August, primarily attributed to higher oil prices. This development increases the likelihood of another interest rate hike by the Reserve Bank of Australia (RBA).
• The escalation of the Middle East conflict could prompt the RBA to implement a 25 basis points (bps) interest rate hike, bringing it to 4.35% by the end of the year.
• The heightened geopolitical tension is contributing to increased demand for commodities like energy and gold, positively influencing the performance of the AUD/USD pair.
• Australia’s Westpac Consumer Confidence showed that current buying conditions improved in October. The index rose 2.9% from the previous 1.5% decline in September.
• After engaging in discussions with US Senators on Tuesday, China's Commerce Minister, Wang Wentao, expressed that "both sides had rational and pragmatic discussions." Emphasizing the significance of the US-China economic and trade relationship.
• The US Nonfarm Payroll report for September revealed a notable increase of 336,000 jobs, surpassing the market expectation of 170,000. The revised figure for August stood at 227,000.
• US Average Hourly Earnings (MoM) remained steady at 0.2% in September, falling short of the expected 0.3%. On an annual basis, the report indicated a rise of 4.2%, below the anticipated consistent figure of 4.3%.
• The yields on US Treasury bonds slightly recovered on Tuesday. However, the 10-year US Treasury bond yield stands down at 4.64%.
• Atlanta's Fed President Raphael Bostic went on record stating that the current monetary policy is already restrictive, rendering additional rate hikes unnecessary, following the dovish trajectory established by two fellow Fed colleagues on Monday, Minneapolis Fed President Neel Kashkari echoed a similar sentiment on Tuesday.
• Investors will closely watch economic data, particularly focusing on inflation figures. The Producer Price Index (PPI) is scheduled for Wednesday, followed by the release of the FOMC meeting minutes and the Consumer Price Index (CPI) on Thursday along with Australia’s Consumer Inflation Expectations.

Technical Analysis: Australian Dollar looks to approach 0.6450, 23.6% Fibonacci retracement acts as a barrier

The Australian Dollar hovers around the 23.6% Fibonacci retracement level at 0.6429 on Wednesday, presenting a noteworthy barrier. A decisive breakthrough above this level could open the door for further upward exploration, targeting the psychological level of 0.6450. Beyond that, the 50-day Exponential Moving Average (EMA) at 0.6456 emerges as a potential resistance, following the 38.2% Fibonacci retracement at 0.6518. On the downside, a pivotal support level is identified at 0.6300, followed by the November low at 0.6272. These levels play a crucial role in indicating potential shifts in the trajectory of the AUD/USD pair.

AUD/USD: Daily Chart