The Australian Dollar (AUD) held steady on Tuesday, maintaining gains from the previous session bolstered by improved Purchasing Managers Index (PMI) data. The Reserve Bank of Australia (RBA) opted to keep the Official Cash Rate (OCR) unchanged at 4.35%, marking the eighth consecutive month of holding rates steady. Analysts anticipate the RBA will continue this trend after its upcoming policy meeting.
RBA Governor Michele Bullock highlighted the necessity of maintaining restrictive interest rates in light of persistent inflationary pressures. Although the labor market remains tight, signs indicate a deceleration in wage growth.
Australia’s Judo Bank Services PMI rose to a final reading of 51.0 in October, up from 50.6, surpassing market expectations. The Composite PMI also saw an increase to 50.2, compared to 49.8 previously. In a parallel development, the Caixin China Services PMI climbed to 52.0 in October, up from 50.3 in September.
As the US presidential election looms, investors are keeping a close watch. Former President Donald Trump and Vice President Kamala Harris are campaigning vigorously in Pennsylvania on the eve of the election, both expressing confidence in their chances. Opinion polls show a near tie between the two candidates, with results potentially taking days to finalize. Trump has indicated he may challenge any unfavorable outcomes, reminiscent of the 2020 election.
Amid the election-related uncertainty, the US dollar (USD) has struggled, with analysts pointing to a poll from the Des Moines Register/Mediacom showing Harris leading Trump 47% to 44% in Iowa as a contributing factor to the currency‘s decline.
Additionally, attention is focused on the US Federal Reserve’s policy decision scheduled for Thursday, with markets anticipating a modest 25 basis point rate cut. The CME FedWatch Tool indicates a 99.5% likelihood of this quarter-point reduction in November.
In Australia, the TD-MI Inflation Gauge rose by 0.3% month-over-month in October, up from a 0.1% increase in September, marking the highest reading since July, just before the RBA’s November policy meeting. Annually, the gauge climbed 3.0%, an increase from 2.6% in the previous reading.
The ANZ Australia Job Advertisements showed a 0.3% month-over-month increase in October, reflecting a notable slowdown from the revised 2.3% gain in September, but still marking the second consecutive month of growth.
On the international front, China’s Commerce Minister Wang Wentao met with Australia’s Trade Minister Don Farrell, where China expressed hopes for Australia to enhance its business environment and ensure fair treatment for Chinese enterprises.
The US Bureau of Labor Statistics (BLS) reported a modest rise of 12,000 in October’s Nonfarm Payrolls, down significantly from a revised September increase of 223,000, which had fallen short of market expectations. The Unemployment Rate held steady at 4.1%, aligning with forecasts.
In terms of price metrics, Australia’s Producer Price Index rose by 0.9% quarter-on-quarter in Q3, exceeding expectations of a 0.7% increase and marking the 17th consecutive period of producer inflation. However, the annual growth rate slowed to 3.9% in Q3, down from 4.8% in the previous quarter.
Technical Analysis: The AUD/USD exchange rate was trading near 0.6590 on Tuesday, with indications that the bearish trend may ease as the pair approaches the nine-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) remains below 50, signaling continued bearish sentiment.
On the resistance front, AUD/USD encounters the nine-day EMA at 0.6596, with additional resistance at the 14-day EMA at 0.6618. A breakout above these levels could bolster the pair’s strength, potentially targeting the psychological milestone of 0.6700.
Conversely, immediate support is located around a three-month low of 0.6536. A decline below this threshold may push the pair towards significant psychological support at 0.6500.
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