The Australian Dollar (AUD) came under renewed pressure against the US Dollar (USD) on Monday, as robust US economic data and hawkish signals from the Federal Reserve (Fed) bolstered the greenback. However, the downside for the AUD/USD pair was tempered by hawkish commentary from Reserve Bank of Australia (RBA) Governor Michele Bullock, who last week reaffirmed that current interest rates remain sufficiently restrictive. Bullock emphasized that rates will stay unchanged until inflation trends are deemed sustainable.
Mixed Domestic Signals for the AUD
Australia’s 10-year government bond yield eased to 4.66%, retreating from a one-year high. October employment data showed a slowdown in job growth, with only 15.9K new positions added, falling short of the anticipated 25K. Despite this, the unemployment rate held steady at 4.1%, reflecting resilience in the labor market. Meanwhile, Australia’s Consumer Inflation Expectations dropped to 3.8% in November, marking the lowest level since October 2021.
Investors are now eyeing the release of the RBA’s meeting minutes on Tuesday for further clarity on the central bank’s monetary policy outlook.
Fed Hawkishness Bolsters USD
The US Dollar gained strength following robust retail and manufacturing data alongside hawkish commentary from Fed officials. Retail Sales rose by 0.4% month-over-month in October, exceeding market expectations, while the NY Empire State Manufacturing Index unexpectedly surged to 31.2 in November.
Fed Chair Jerome Powell dismissed prospects of imminent rate cuts, citing economic resilience and persistent inflation. Powell noted, “The economy is not sending any signals that we need to be in a hurry to lower rates.” Supporting Powell’s stance, Boston Fed President Susan Collins and Chicago Fed President Austan Goolsbee both advocated for a cautious approach, with Collins emphasizing the need to balance inflation control with economic health.
The US Producer Price Index (PPI) also highlighted persistent inflationary pressures, rising by 2.4% year-over-year in October, up from September’s revised 1.9%. Core PPI grew 3.1%, slightly exceeding expectations.
China’s Data and Impact on AUD
As a key trading partner, China’s economic performance significantly influences the Australian Dollar. Recent data revealed a mixed outlook: Retail Sales in China grew by 4.8% year-over-year in October, surpassing expectations, while Industrial Production rose by 5.3%, slightly missing forecasts. The National Bureau of Statistics (NBS) reported improving consumer expectations and pledged intensified policy adjustments to bolster domestic demand.
Technical Analysis: AUD/USD Outlook
The AUD/USD pair hovered around 0.6470, signaling ongoing downward pressure. Despite this, the 14-day Relative Strength Index (RSI) showed signs of recovery from oversold territory, suggesting waning selling pressure and the potential for an upward correction.
Key support lies at the psychological 0.6400 level; a breach could drive the pair toward the yearly low of 0.6348. On the upside, immediate resistance is at 0.6500, followed by the nine-day EMA at 0.6514 and the 14-day EMA at 0.6542. Surpassing these levels could pave the way for a rally toward 0.6687, the three-week high.
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