Australian Dollar avoids reacting to RBA minutes amid a stronger US Dollar

• Australian Dollar halts its winning streak on Tuesday on an improved US Dollar.
• Australia’s ASX 200 index moves lower and weighs on Aussie Dollar.
• PBoC maintains its one-year LPR at 3.45% but reduced the five-year LPR by 25 basis points.
• Greenback gains ground on higher US Treasury yields.

The Australian Dollar (AUD) snaps a four-day winning streak on Tuesday amid an improved US Dollar (USD). Higher US Treasury yields support the Greenback, putting pressure on the AUD/USD pair. Additionally, the AUD faced downward pressure from a weaker Aussie money market. The S&P/ASX 200 index halted its winning streak, with mining and energy stocks declining amid weaker commodity prices.

Australian Dollar avoids reacting to the Reserve Bank of Australia’s (RBA) minutes from the February monetary policy meeting. The RBA Board discussed the possibility of hiking rates by 25 basis points (bps) or maintaining the status quo. While data provided the board with more confidence that inflation would return to target within a reasonable timeframe, it was noted that it would "take some time" before the board could be sufficiently confident about inflation. Therefore, the board agreed that it was appropriate not to rule out another rate hike.

The US Dollar Index (DXY) edges higher as the market returns from a holiday-extended weekend, with investors eagerly anticipating the release of the US Federal Open Market Committee (FOMC) Minutes scheduled for Wednesday. ANZ anticipates that the Federal Reserve (Fed) will commence rate cuts from July 2024. According to the CME FedWatch Tool, there is approximately a 53% probability of a 25 basis points rate cut by the US Fed in the June meeting.

Daily Digest Market Movers: Australian Dollar depreciates on improved US Dollar

• The ANZ-Roy Morgan Consumer Confidence improved to 82.8 this week from 82.6 prior. Remarkably, the index has now spent a record 55 consecutive weeks below the mark of 85.
• Westpac expects a resilient Australian economy supported by low unemployment and healthy corporate sector balance sheets. Westpac anticipates the RBA will maintain its current monetary policy stance throughout 2024 and adopt a less restrictive approach in 2025.
• The People’s Bank of China (PBoC) decided to maintain its one-year Loan Prime Rate (LPR) at 3.45%. Additionally, the PBoC reduced the five-year LPR by 25 basis points from 4.20% to 3.95%.
• Premier of the People's Republic of China, Li Qiang, emphasized the importance of maintaining consistent and stable policies. The PBoC opted to keep its Medium-term Lending Facility (MLF) rate unchanged at 2.5%.
• The Federal Reserve's dot plot for this year indicates an expectation of 75 basis points in rate cuts, whereas the Fed funds futures market is pricing in approximately 89 basis points in cuts.
• San Francisco Federal Reserve President Mary C. Daly addressed the Annual National Association for Business Economics (NABE) Policy Conference, where she mentioned that three rate cuts are a reasonable baseline for 2024. Daly emphasized that it's premature to consider allowing the economy to run without intervention.
• St. Louis Federal Reserve (Fed) president, James Bullard suggested at the NABE conference that the Federal Reserve should consider lowering interest rates at its March meeting to avoid dampening economic activity due to higher rates.
• The preliminary Michigan Consumer Sentiment Index improved to 79.6 from 79.0 prior, lower than the expected reading of 80.0.
• The US Core Producer Price Index (YoY) improved by 2% in January, surpassing the expected 1.6% and 1.7% prior. While, the MoM data showed a rise of 0.5%, against the expected 0.1% improvement from the previous decline of 0.1%.
• US Producer Price Index came in at 0.9% year-over-year compared to the anticipated 0.6% and previous growth of 1.0%. Meanwhile, monthly improvement was 0.3% against the previous decline of 0.1%.
• US Building Permits (MoM) contracted to 1.470 million in January, against the expected rise to 1.509 million from the previous 1.493 million.

Technical Analysis: Australian Dollar trades near 0.6530 above the support at nine-day EMA

The Australian Dollar trades near 0.6530 on Tuesday, positioned above the immediate support around the nine-day Exponential Moving Average (EMA) at 0.6523 followed by the psychological support level of 0.6500. On the upside, the AUD/USD pair could find the key resistance zone around the 23.6% Fibonacci retracement at 0.6543 and the major level of 0.6550. A breakthrough above this zone could lead the AUD/USD pair to approach the psychological barrier of 0.6600 before the 38.2% Fibonacci retracement level of 0.6606.

AUD/USD: Daily Chart