On Tuesday, the Australian Dollar (AUD) exhibited an upward trajectory, bolstered by a weakening US Dollar (USD) during the early Asian trading hours. However, a decline in Australia’s Westpac Consumer Confidence data introduced a slight downward pressure on the AUD.
The Westpac Consumer Confidence data for March 2024 revealed a 1.8% decrease to 84.4 from February’s 86.0, signaling a retreat from the 20-month highs previously recorded. Despite this decline, the Australian equity market received support amidst expectations of a potential rate cut, driven by subdued consumer confidence levels. This bolstered the Australian Dollar’s strength, enabling it to sustain its gains.
Notably, the ASX 200 Index extended its winning streak despite modest weakness observed in Wall Street overnight, further indicating the resilience of the Australian market.
Investor attention is now focused on the impending release of Australia’s monthly Consumer Price Index (CPI) data on Wednesday, with expectations of heightened scrutiny given prevailing market conditions.
Meanwhile, the US Dollar Index (DXY) endured a second consecutive day of losses, primarily attributed to diminishing US Treasury yields. Speculation surrounding the Federal Reserve (Fed) commencing an easing cycle, possibly starting in June, continued to influence market sentiment.
In other market developments, Australia’s government pledged support for a minimum wage increase in line with inflation, aiming to alleviate financial pressures on low-income families amid rising living costs.
Furthermore, a Bloomberg survey of economists anticipates two additional Reserve Requirement Ratio (RRR) cuts by the People’s Bank of China (PBoC) in 2024, totaling a 50 basis point reduction. Additionally, Chinese President Xi Jinping is scheduled to meet with American business leaders in Beijing, following up on previous engagements aimed at fostering bilateral economic relations.
Amidst differing views within the Federal Reserve, Atlanta Fed President Raphael Bostic expressed caution regarding premature rate cuts, while Chicago Fed President Austan Goolsbee aligned with the majority anticipating three cuts, contingent on evidence of decreasing inflation.
Regarding recent economic indicators, US New Home Sales Change declined slightly, while S&P Global Services PMI exhibited a modest decrease in March.
From a technical perspective, the Australian Dollar hovered near the major level of 0.6550 on Tuesday. A successful breach above this level could encounter resistance at the nine-day Exponential Moving Average (EMA) at 0.6554, potentially leading to a test of the 38.2% Fibonacci retracement level at 0.6565. Conversely, downside movement may find support at the psychological mark of 0.6500, followed by March’s low at 0.6477.
