Australian Dollar treads water to hold position despite subdued Consumer Confidence

• Australian Dollar holds ground amid improved risk appetite on Tuesday.
• Australia’s Westpac Consumer Confidence fell by 2.4% in April, against the previous decline of 1.8%.
• US Dollar receives downward pressure as volatility prevails ahead of US CPI.

The Australian Dollar (AUD) continues to hold onto its gains registered in the previous session despite the subdued Westpac Consumer Confidence released on Tuesday. The decline in the US Dollar (USD) provided support for the AUD/USD pair, which could be attributed to the improved risk appetite.

The Australian Dollar strengthens amid a higher domestic equity market. The ASX 200 Index positions for gains as investor attention remains fixed on the Reserve Bank of Australia’s (RBA) interest rate decisions. Investors are growing more doubtful about the need for the RBA to cut interest rates in 2024, especially after positive US data bolstered expectations that the Federal Reserve (Fed) may prolong its higher interest rate stance.

The US Dollar Index (DXY) encounters hurdles as the Federal Reserve carefully evaluates incoming data, prompting fluctuations in the market. Traders are eagerly anticipating the release of the US Consumer Price Index data scheduled for Wednesday. Additionally, attention will be focused on Australian Consumer Inflation Expectations and Chinese consumer prices slated for Thursday.

Daily Digest Market Movers: Australian Dollar holds position amid weaker Consumer Confidence

• Australia’s Westpac Consumer Confidence declined by 2.4% in April, against the previous fall of 1.8%.
• Australian data showed on Friday that Trade Surplus (MoM) narrowed to 7,280 million in March, falling short of the expected 10,400 million and February’s reading of 10,058 million.
• Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari emphasized the importance of the central bank's commitment to combatting inflation. Kashkari stressed that despite the current inflation rate hovering around 3%, the Fed must strive to bring it back down to the target level of 2%.
• According to the CME FedWatch Tool, the likelihood of a 25-basis point rate cut by the Fed in June has reduced to 51.1%.
• US headline CPI is expected to experience an acceleration in March, whereas the core measure is expected to show a cooling down.
• US Nonfarm Payrolls (NFP) reported a significant increase of 303,000 jobs in March, surpassing expectations of 200,000 and the previous reading of 270,000.
• US Average Hourly Earnings rose by 0.3% month-over-month in March, meeting expectations. The previous reading was 0.2%. There was an increase of 4.1% on an annual basis, aligning with the market consensus but slightly lower than 4.3% prior.

Technical Analysis: Australian Dollar hovers above the psychological support of 0.6600

The Australian Dollar trades around 0.6610 on Tuesday. The AUD/USD pair may experience an upward movement, as it has recently tested the range around 0.6620 and 0.6630 multiple times throughout March. Moreover, the pair surpassed the nine-day Exponential Moving Average (EMA) in the previous week and has found support on it since then. The key resistance region is observed around the major level of 0.6650, followed by March’s high of 0.6667. On the downside, immediate support is identified around the psychological level of 0.6600, followed by the nine-day EMA at 0.6570 and the major support level of 0.6550.

AUD/USD: Daily Chart