The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Thursday, despite a slight recovery in the AUD/USD pair due to a modest decline in US Treasury yields. The Australian currency may find some support from the Reserve Bank of Australia‘s (RBA) hawkish stance.
RBA Deputy Governor Andrew Hauser recently emphasized the strong labor participation rate in Australia, noting that while the RBA considers data in its decisions, it is not overly reliant on it.
The US Dollar has gained strength as traders focus on the Federal Reserve’s (Fed) interest rate trajectory, with rising expectations that the central bank will adopt a more cautious approach to rate cuts than previously anticipated. Additionally, speculation surrounding a potential second term for former President Donald Trump in the upcoming presidential election is bolstering the Greenback. Investors are also looking forward to key data releases on US Durable Goods Orders and the Michigan Consumer Sentiment Index on Friday.
During a rally in Las Vegas, Trump reiterated his economic agenda, stating, “Under the Trump administration, we’re going to build an economy that lifts up all Americans, including African Americans, Hispanic Americans, and also members of our great Asian American and Pacific Islander community.”
Market analysts indicate a 97% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a larger cut. Vice President Kamala Harris recently received support from prominent figures like Bruce Springsteen and former President Barack Obama at a rally in Georgia, a key battleground state.
In economic news, S&P Global’s preliminary October Purchasing Managers Index (PMI) readings showed positive momentum across sectors, with the Composite PMI rising to 54.3, up from 54.0. The Services PMI exceeded expectations at 55.3, while the Manufacturing PMI improved to 47.8, both showing resilience against forecasts.
In contrast, Australia’s Judo Bank Composite PMI slightly rose to 49.8 in October, indicating a second consecutive month of contraction in private sector output. The Services PMI edged up to 50.6, reflecting ongoing expansion, while the Manufacturing PMI continued to decline, dipping to 46.6.
Recent commentary from the Federal Reserve suggests a cautious outlook. The Fed’s Beige Book indicated that economic activity remained “little changed” across most districts, contrasting with previous reports of growth. Federal Reserve Bank of San Francisco President Mary Daly remarked that the economy is in a better position, with inflation down and the labor market stabilizing.
In Asia, the People’s Bank of China (PBoC) cut the 1-year Loan Prime Rate (LPR) to 3.10% and the 5-year LPR to 3.60%, aiming to stimulate domestic economic activity and potentially increase demand for Australian exports.
National Australia Bank recently revised its projections for the RBA, now forecasting the first rate cut in February 2025, moved forward from May, with rates expected to decrease to 3.10% by early 2026.
From a technical standpoint, the AUD/USD pair is trading around 0.6640, reflecting a short-term bearish trend. The pair remains below the nine-day Exponential Moving Average (EMA), with the 14-day Relative Strength Index (RSI) below 50, confirming the bearish sentiment.
Support is being tested at the two-month low of 0.6614, with a major psychological support level at 0.6600. On the upside, resistance is anticipated at the nine-day EMA at 0.6672, followed by the 50-day EMA at 0.6724. A breakout above these levels could signal a potential move toward the psychological barrier of 0.6800.
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