Australian Dollar advances amid stable US Dollar, with attention on Fed policy decision

• Australian Dollar gains ground on higher ASX 200 index on Wednesday.
• RBA’s Bullock emphasized that the fight against inflation is still ongoing.
• PBoC has kept the interest rate unchanged at 3.45%.
• FOMC could maintain its key cash rates within a range of 5.25% to 5.50%.

The Australian Dollar (AUD) has rebounded from intraday losses and is striving to shift into positive territory on Wednesday. The higher ASX 200 may have lent support to the AUD, thereby bolstering the AUD/USD pair. However, the robust US Dollar could be exerting downward pressure on the pair.

The Reserve Bank of Australia (RBA) has chosen to maintain interest rates at a 12-year high of 4.35% on Tuesday, consistent with its stance for the third consecutive meeting. RBA Governor Michele Bullock emphasized that the battle against inflation is ongoing. While acknowledging persistently high inflation, she refrained from providing specific details regarding the timing or likelihood of rate adjustments, indicating that the bank remains open to various possibilities.

The US Dollar Index (DXY) continues its recent uptrend, which was initiated on Thursday. The strength of the US Dollar is attributed to improved US Treasury yields. Investors eagerly await the interest rate decision from the US Federal Reserve (Fed) scheduled for Wednesday. The Federal Open Market Committee (FOMC) is widely anticipated to maintain its key federal funds interest rate within a range of 5.25% to 5.5%.

Daily Digest Market Movers: Australian Dollar recovers losses amid higher equity market

• The ANZ-Roy Morgan Australian Consumer Confidence index, which is published weekly, stands at 81.7, compared to the previous week's reading of 82.2.
• People’s Bank of China (PBoC) has kept its interest rate unchanged at 3.45%.
• Chinese Foreign Minister Wang Yi met Australia's Foreign Affairs Minister Penny Wong. The Chinese side emphasized their substantial potential. They stressed that China-Australia relations are progressing positively and urged against any hesitation, deviation, or reversal in this forward momentum.
• According to the CME FedWatch Tool, the probability of a rate cut in May stands at 6.3%. The likelihood of a rate cut in June and July is increased, at 59.2% and 76.0%, respectively.
• US Building Permits (MoM) increased to 1.518 million in February, against the expected 1.495 million and 1.489 million prior.
• US Housing Starts (MoM) rose to 1.521M from the previous figure of 1.374M, exceeding the market expectation of 1.425M in February.
• 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%.

Technical Analysis: Australian Dollar hovers below the major barrier of 0.6550

The Australian Dollar trades near 0.6540 on Wednesday. Immediate resistance is noted at the major level of 0.6550, followed by the nine-day Exponential Moving Average (EMA) at 0.6561. A breakthrough above this level could potentially propel the AUD/USD pair towards the psychological level of 0.6600. On the downside, the 61.8% Fibonacci retracement level of 0.6528 acts as an immediate support before the psychological level of 0.6500. A breach below this support zone might exert pressure on the AUD/USD pair, potentially leading to a retest of March’s low at the 0.6477 level.

AUD/USD: Daily Chart