On Wednesday, the Australian Dollar (AUD) experienced a retracement of its recent gains, coinciding with a depreciation of the US Dollar (USD) due to downward pressure on US Treasury yields. This depreciation of the USD provided support to the AUD/USD pair. However, the decline in the ASX 200 Index added pressure on the AUD.
According to the Australian Industry Group (AiG) Industry Index, there was improvement in February, with a rise to a reading of -5.3 from the previous -14.9. Similarly, the AiG Manufacturing PMI showed improvement, coming in at -7 compared to the prior reading of -12.6. Additionally, Westpac’s summary of the Reserve Bank of Australia (RBA) March meeting minutes indicated that the current cash rate level is considered suitable for present circumstances, though conditions may evolve in the future.
Meanwhile, the US Dollar Index (DXY) faced hurdles following dovish remarks from Federal Reserve (Fed) officials. Cleveland Fed President Loretta Mester anticipated rate cuts later this year, while San Francisco Fed President Mary Daly expressed the view that three rate cuts in 2024 seem “reasonable,” contingent upon further convincing evidence.
In the daily market digest:
The AiG Construction PMI posted a reading of -12.9 in February, compared to the previous reading of -18.4.
Australia’s TD Securities Inflation (YoY) came in at 3.8% in March, down from the previous increase of 4.0%.
Melbourne Institute’s Monthly Inflation Gauge increased by 0.1% in March, following a decrease of 0.1% in the previous month.
ANZ Job Advertisements declined by 1.0% in March, compared to the previous decline of 2.1%.
Regarding the RBA March minutes, the board did not consider raising interest rates, acknowledging the challenging nature of predicting future changes in the cash rate. While the economic outlook remained uncertain, the risks appeared balanced, with confidence in inflation returning to the target level requiring “some time.”
On the global front, China’s Caixin Manufacturing PMI came in slightly above expectations, while the US ISM Manufacturing PMI indicated a surprise expansion in March, reaching its highest level since September 2022.
Looking at technical analysis, the Australian Dollar held its position above the psychological level of 0.6500, hovering around 0.6510 on Wednesday. Immediate support is observed around 0.6500, with key resistance at the 23.6% Fibonacci retracement level of 0.6525.
