Australian Dollar snaps a two-day winning streak post moderate US data

• Australian Dollar moves sideways amid mixed US economic data.
• Australia’s data showed a slowdown in economic activities during November.
• RBA Governor Bullock mentioned that policy tightening is the appropriate response to demand-driven inflation.
• US Dollar extended the correction ahead of the Thanksgiving Day holiday.

The Australian Dollar (AUD) attempts to snap the recent losses on Thursday. However, the AUD/USD pair faced downward pressure, likely due to increased demand for the US Dollar (USD) following the release of economic reports from the United States (US). Market activity is subdued as traders prepare for the Thanksgiving Day holiday in the US on Thursday, with shortened trading sessions expected on Friday.

Australia's economic activity shows signs of a slowdown in November, according to Thursday's data. The preliminary Judo Bank Manufacturing PMI for the month is reported at 47.7, down from the previous month's 48.2. Judo Bank Services PMI also declined to 46.3 from the prior 47.9, and the Composite PMI decreased to 46.4 from the previous reading of 47.6.

Reserve Bank of Australia (RBA) Governor Michele Bullock addressed the recent monetary policy decision at the ABE Annual Dinner in Sydney on Wednesday. She noted that the inflation challenge is increasingly driven by domestic factors, particularly demand. Bullock emphasized that monetary policy tightening is the appropriate response to demand-driven inflation. While supply-chain inflation is easing, Australian inflation remains broad-based, with the trimmed mean still too high.

Governor Michele Bullock also mentioned that prices are rising strongly for most goods and services, and service costs are increasing due to high demand. RBA's liaison with firms indicates persistent domestic cost pressures, with high capacity utilization and a tight labor market. Bullock highlighted the need to cool demand while ensuring employment growth.

The US Dollar Index (DXY) experienced a rebound after the release of mixed US economic reports, continuing its correction but losing momentum amid higher equity prices. US Jobless Claims data on Wednesday showed a greater-than-expected decline in the week ending on November 17, with Initial Claims falling to 209K from 233K. Durable Goods Orders fell 5.4% in October, exceeding the expected 3.1% decline. However, the University of Michigan Consumer Sentiment Index for November stood at 61.3, compared to the expected reading of 60.5.

Daily Digest Market Movers: Australian Dollar moves sideways amid improved US Dollar

• Australia’s Westpac Leading Index (MoM) for October contracted by 0.03% against the previous 0.07% rise.
• RBA's meeting minutes revealed that the board acknowledged a "credible case" against an immediate rate hike but considered the case for tightening stronger due to increased inflation risks. The decision on further tightening would hinge on data and risk assessment.
• RBA’s minutes also stressed the importance of preventing even a modest rise in inflation expectations. Board forecasts assumed one or two more rate rises, and rising house prices suggested policy might not be overly restrictive.
• Chinese authorities are expected to take measures to support the real estate sector by drafting a list of 50 eligible developers, both private and state-owned. This list is expected to guide financial institutions in providing support through various means such as bank loans, debt, and equity financing.
• The Federal Open Market Committee (FOMC) meeting minutes reveal that members would entertain the idea of tightening monetary policy further if incoming information suggests insufficient progress toward the Committee's inflation objective.
• FOMC members unanimously agree that policy should stay restrictive for some time until there is clear and sustainable evidence of inflation moving down toward the Committee's target.
• US Existing Home Sales Change (MoM) for October declined by 4.1% as compared to the previous fall of 2.2%.

Technical Analysis: Australian Dollar remains below 0.6550, support at the 23.6% Fibonacci retracement

The Australian Dollar hovers around the 0.6540 level on Thursday. The 23.6% Fibonacci retracement at 0.6513 could serve as a key support. A potential break below this level might find support from the nine-day Exponential Moving Average (EMA) at 0.6510, coupled with the major level at 0.6500. On the upside, breaching the barrier at the 0.6550 major level could pave the way for a revisit to the three-month high at 0.6589, situated around the psychological level of 0.6600.

AUD/USD: Daily Chart