Australian Dollar loses ground as US Dollar appreciates on improved US yields

• Australian Dollar depreciates as the US Dollar attempts to hold ground after recent losses.
• Australia employment data suggests that the RBA will avoid an interest rate hike in March.
• S&P/ASX 200 index improves following the overnight surge in Wall Street on market optimism.
• US Dollar holds ground over market sentiment suggesting that the Fed will postpone rate cuts in the upcoming meetings.

The Australian Dollar (AUD) attempts to halt its gains registered in the last two sessions as the US Dollar (USD) gains ground on improved Treasury yields. However, the AUD/USD pair received upward support after mixed economic data from the United States (US). Additionally, the S&P/ASX 200 index improves following the overnight surge in Wall Street. Investors remain optimistic ahead of US Producer Price Index (PPI) data and Michigan Consumer Sentiment Index due on Friday.

Australian economy has shown modest growth, influenced by ongoing challenges in the labor market and subdued inflationary pressures. Recent employment data suggests that the Reserve Bank of Australia (RBA) is unlikely to raise interest rates further in the March meeting. Market expectations now indicate that the RBA will maintain its current rates until August, with a 25 basis points (bps) rate cut anticipated in September, compared to earlier projections for November.

The US Dollar Index (DXY) remains stable, buoyed by market sentiment suggesting that the US Federal Reserve (Fed) will postpone interest rate cuts in the upcoming March and May meetings. According to the FedWatch Tool, investors are now pricing in a 25 bps rate cut in May, with a likelihood of 53%. The US Dollar encountered difficulties following disappointing US Retail Sales data. However, the impact on the advance of the AUD/USD pair may have been mitigated by the decrease in Initial Jobless Claims.

Daily Digest Market Movers: Australian Dollar depreciates amid a stable US Dollar

• Australia’s seasonally adjusted Employment Change printed the reading of 0.5K for January, against the market expectation of 30K.
• Aussie Part-Time Employment came in at 10.6K as compared to the previous figure of 46.7K.
• Australian Participation Rate remained consistent at 66.8%, lower than the anticipated 66.9% in January.
• January’s Full-Time Employment improved to 11.1K from the previous decline of 109.4K.
• Australia’s Consumer Inflation Expectations data is unchanged at 4.5% for February.
• Reserve Bank of Australia Governor Michele Bullock addressed the Australian parliament's Senate Economics Legislation Committee, noting that the global economy has fared better than initially anticipated. She expressed previous concerns about potential hard landings and recessions but indicated that the economy is currently in a favorable position to bring inflation down within a reasonable timeframe.
• Federal Reserve Bank of Atlanta President Raphael W. Bostic anticipates further advancements in inflation but could be bumpy. He notes that if inflation retreats faster, it could prompt a reassessment of his stance on the outlook for interest rates.
• US Retail Sales showed that consumer spending declined by 0.8% MoM in January. The market prediction was a decline of 0.1% against the previous increase of 0.4%.
• US Retail Sales Control Group decreased by 0.4% in January, swinging from the previous increase of 0.6%.
• US Initial Jobless Claims reported 212,000 unemployment claims for the week ending on January 9, against the market expectation of remaining consistent at 220,000.
• US January’s Industrial Production (MoM) is contracted by 0.1% against the expected improvement of 0.3% from a flat 0.0% prior.

Technical Analysis: Australian Dollar hovers above the resistance level of 0.6500

The Australian Dollar trades near 0.6510 on Friday, positioned above the immediate support at the psychological level of 0.6500. A break below this level could push the AUD/USD pair to navigate the major support at 0.6450 before the weekly low at 0.6442. Conversely, the AUD/USD pair could find the key resistance region around the 14-day Exponential Moving Average (EMA) located at 0.6525. A breakthrough above the latter could lead the pair to target the 23.6% Fibonacci retracement level at 0.6543 and the major resistance level at 0.6550.

AUD/USD: Daily Chart