Australian Dollar aims to recover from a three-day losing streak ahead of RBA minutes

• Australian Dollar retraces recent losses post-release of the RBA Meeting Minutes on Tuesday.
• RBA is exploring the possibility of introducing a central bank digital currency to save costs of billions of dollars.
• Investors seem to price in the possibility of another Fed rate hike following a slew of robust US data.

The Australian Dollar (AUD) kicks off the week by recovering from the three-day losing streak, trading higher against the US Dollar on Monday. The pair faced challenges possibly due to the shift in discussions about the trajectory of the US Federal Reserve's (Fed) monetary policy. Investors are expected to focus on the Reserve Bank of Australia’s (RBA) Meeting Minutes on Tuesday and employment data later in the week.

Australia’s central bank is exploring possibly introducing a central bank digital currency (CBDC). Brad Jones, Assistant Governor (Financial System) at the RBA, discussed the tokenization of assets and money in the digital era at The Australian Financial Review Cryptocurrency Summit. Governor Jones highlighted the potential for tokenized money to bring about significant cost savings, potentially amounting to billions of dollars, in the domestic financial markets.

The National Bureau of Statistics of China reported on Friday that Chinese inflation experienced a decrease in September. This development could exert pressure on the Australian Dollar (AUD). The Chinese data indicates ongoing economic challenges despite the recent government stimulus plan aimed at supporting the nation in achieving its 5% growth target.

The US Dollar Index (DXY) gained upward momentum after a release of robust US data during the previous week, with US inflation surpassing expectations and initial jobless claims coming in lower than anticipated. However, the preliminary US Michigan Consumer Sentiment Index was eased in October.

Investors seem to factor in the possibility of another Federal Reserve’s (Fed) rate hike. Moreover, the recovery in US Treasury yields from the recent losses could provide support in underpinning the US Dollar (USD). Additionally, the Greenback remains to benefit from the safe-haven flow amid the rising geopolitical tension between Israel and Palestine.

Daily Digest Market Movers: Australian Dollar attempts to retrace a three-day losing streak

• Reserve Bank of Australia is exploring possibly introducing a central bank digital currency (CBDC).
• On Thursday, Australian Consumer Inflation Expectations for October were reported at 4.8%, reflecting a slight increase from the September figure of 4.6%. The rebound in inflation observed in August, primarily influenced by elevated oil prices, raises the likelihood of another interest rate hike by the RBA.
• According to the National Bureau of Statistics of China, the Chinese Consumer Price Index (CPI) for September registered at 0% (YoY), a decline from the previous reading of 0.1%. This figure fell short of the market consensus, which anticipated a 0.2% increase. Additionally, the Producer Price Index dropped to 2.5% from a 3% decline in August, missing the expectation of a 2.4% downturn.
• The ongoing conflict in the Middle East introduces an additional layer of complexity to the situation. This geopolitical factor could potentially prompt the RBA to implement a 25 basis points (bps) interest rate hike, reaching 4.35% by the end of the year.
• According to an undisclosed source to Reuters, US officials and Israel have engaged in discussions about the possibility of a visit by US President Joe Biden to Israel. The invitation for the visit reportedly came from Israeli Prime Minister Benjamin Netanyahu.
• The US Bureau of Labor Statistics (BLS) disclosed that the Consumer Price Index in the US surpassed forecasts in September. The annual basis figures expanded at a consistent rate of 3.7%, slightly exceeding estimates of 3.6%.
• US Initial Jobless Claims for the week ending on October 6 showed a slight easing, despite an increase of 209K, which was slightly below the forecast of 210K.
• On Friday, the preliminary US Michigan Consumer Sentiment Index for October showed a decline to 63.0 from the previous reading of 68.1, falling short of the expected figure of 67.4.
• The yields on US Treasury bonds recovers on Monday, with the 10-year US Treasury bond yield standing at 4.66%, up by 1.04%.
• Market participants will likely monitor the US Retail Sales on Tuesday, with the figure expected to rise 0.2%. On the Australian docket, attention will be on the Reserve Bank of Australia (RBA) meeting minutes and employment data scheduled for release in the coming week.

Technical Analysis: Australian Dollar consolidates above the psychological support at the 0.6300 level

The Australian Dollar trades around 0.6310, in proximity to a significant support level at 0.6300, which aligns with the monthly low at 0.6285. On the upside, a key resistance is observed at the 44-day Exponential Moving Average (EMA) around the 0.6427 level, coinciding with the 23.6% Fibonacci retracement level at 0.6429. A decisive breakthrough of this resistance could open the path for upward momentum, with a potential target set at the psychological milestone of 0.6500. These technical levels guide traders to assess potential price movements in the Aussie Dollar.

AUD/USD: Daily Chart