Australian Dollar weakens as the ASX 200 Index falls amid market apprehension

• Australian Dollar receives downward pressure ahead of policy decisions from the Fed and RBA.
• Australia's S&P/ASX 200 Index tracks softer commodity prices.
• US Dollar gains strength as expectations mount for the Fed prolonging elevated interest rates.

The Australian Dollar (AUD) kicks off the week with a negative bias of continuing its winning streak for the third successive session. The AUD/USD pair is under downward pressure, likely attributed to market caution ahead of the Reserve Bank of Australia's (RBA) policy decision scheduled for Tuesday. Additionally, investors are awaiting interest rate decisions from both the People's Bank of China (PBoC) and the US Federal Reserve (Fed), expected to be released on Wednesday.

Australian Dollar faces additional pressure as the S&P/ASX 200 Index extends its decline for the third consecutive session. Mining and energy stocks are leading the downturn, reflecting softer commodity prices. Meanwhile, severe Tropical Cyclone Megan is expected to bring destructive winds and heavy rainfall to Australia’s far north. Evacuations are underway, and a major manganese mine has been closed in anticipation of the cyclone's arrival.

The US Dollar Index (DXY) is gaining traction, supported by rising US Treasury yields. This uptick in yields is believed to stem from a hawkish sentiment surrounding the Federal Reserve, which is expected to maintain its higher interest rates in response to recent inflation figures.

Daily Digest Market Movers: Australian Dollar downward pressure amid a market risk aversion

• According to Bloomberg, Westpac anticipates the Reserve Bank of Australia could maintain its cash rate at 4.35% at Tuesday's meeting.
• RBA Governor Michele Bullock recently stated that inflation in Australia is primarily "homegrown" and "demand-driven," attributable to the strength of the labor market and increasing wage inflation. The RBA does not anticipate this phenomenon occurring until 2026.
• According to the CME FedWatch Tool, the probability of a rate cut in March currently stands at 1.0%, while it has decreased to 6.1% for May. The likelihood of a rate cut in June and July is lower, at 56.3% and 75.2%, respectively.
• The preliminary US Michigan Consumer Sentiment Index for March decreased to 76.5, from the previous reading of 76.9. This decline comes in contrast to expectations of it remaining unchanged.
• The Board of Governors of the Federal Reserve released Industrial Production (MoM), which increased by 0.1% in February, against the expected reading of flat 0.0% and from the previous decline of 0.5%.
• The US Core Producer Price Index (PPI) remained consistent with the rise of 2.0% year-over-year in February, maintaining its position above the 1.9% expected. The monthly report showed an increase of 0.3% against 0.5% prior, exceeding the expected 0.2% reading.
• US PPI (YoY) increased by 1.6% in February, surpassing the expected 1.1% and 1.0% prior. PPI (MoM) rose by 0.6% above the market expectation and the previous increase of 0.3%.
• US Retail Sales rose by 0.6% monthly, below the expected 0.8% in February, swinging from the previous decline of 1.1%. While Retail Sales Control Group improved to a flat 0.0%, compared to the previous decline of 0.3%.

Technical Analysis: Australian Dollar hovers above the major support at 0.6550

The Australian Dollar is trading near 0.6560 on Monday. The AUD/USD pair could find immediate support around the 50.0% retracement level of 0.6555, coinciding with a significant support level of 0.6550. A breach below this level could potentially exert downward pressure on the pair, with further support expected around the 61.8% Fibonacci retracement level of 0.6528, followed by the psychological level of 0.6500. On the upside, the AUD/USD pair may face resistance near the nine-day Exponential Moving Average (EMA) at 0.6576, followed by the psychological barrier at 0.6600.

AUD/USD: Daily Chart