The AUD/USD pair saw a brief uplift following the release of China’s Trade Balance data on Tuesday, but the Australian Dollar (AUD) struggled against the US Dollar (USD) due to disappointing Westpac Consumer Confidence figures.
China reported a trade surplus of CNY 649.34 billion for August, up from the previous CNY 601.90 billion. Additionally, China’s exports grew by 8.4% year-on-year, surpassing the previous increase of 6.5%. Despite this positive data, the AUD/USD pair faced challenges as the USD gained traction, influenced by uncertainty over the Federal Reserve’s interest rate decisions.
Australia’s Westpac Consumer Confidence index declined by 0.5% month-on-month in September, a reversal from August’s 2.8% gain. This decline underscores the growing concerns about domestic economic conditions, even as traders keep a close eye on China’s economic indicators due to the significant trade relationship between the two countries.
Market Overview: The US Dollar has received support amid reduced expectations for an aggressive interest rate cut by the Federal Reserve (Fed). According to the CME FedWatch Tool, markets are anticipating at least a 25 basis point (bps) rate cut at the Fed’s September meeting. However, the likelihood of a 50 bps cut has slightly decreased to 29.0%, down from 30.0% a week ago.
China’s Consumer Price Index (CPI) rose by 0.6% year-on-year in August, up from 0.5% in July but falling short of the market consensus of 0.7%. On a monthly basis, CPI inflation increased by 0.4%, down from 0.5% in July and below the expected 0.5%.
In Australia, RBC Capital Markets now predicts that the Reserve Bank of Australia (RBA) may implement a rate cut at its February 2025 meeting, earlier than its previous forecast of May 2025. Despite elevated inflation levels, slower economic growth is not seen as a sufficient trigger for a rate cut this year.
In the US, the Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) increased by 142,000 in August, below the forecast of 160,000 but an improvement from July’s revised figure of 89,000. The Unemployment Rate fell to 4.2%, in line with expectations, down from 4.3% the previous month.
Federal Reserve Bank of Chicago President Austan Goolsbee noted on Friday that Fed officials are aligning with the market sentiment that a policy rate adjustment is imminent. FXStreet’s FedTracker rated Goolsbee’s comments as dovish, with a score of 3.2 on a scale of 0 to 10.
Technical Analysis: The AUD/USD pair is trading around 0.6650 on Tuesday. Technical analysis indicates the pair is moving along the lower boundary of a descending channel, reinforcing a bearish bias. The 14-day Relative Strength Index (RSI) has fallen below 50, confirming the ongoing bearish trend.
On the downside, the AUD/USD pair is targeting the lower boundary of the descending channel near 0.6630. A break below this level could strengthen the bearish sentiment, potentially driving the pair towards the support region around 0.6575.
On the resistance side, the pair may encounter resistance around the nine-day Exponential Moving Average (EMA) at 0.6703. A breakout above this level could ease the bearish pressure and enable the AUD/USD pair to test the upper boundary of the descending channel near 0.6750, with further resistance around the seven-month high of 0.6798 reached on July 11.
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