The Australian Dollar (AUD) extended its downward trend on Thursday, weighed down by disappointing domestic economic data and growing speculation that the Reserve Bank of Australia (RBA) may cut interest rates earlier than anticipated. The potential for U.S. President-elect Donald Trump to introduce tariffs on imports has added further pressure to the currency.
Market participants are now closely watching U.S. economic indicators, including the weekly Initial Jobless Claims and Goods Trade Balance data, for clues on broader trends. Weakness in the U.S. labor market could soften the U.S. Dollar (USD) and offer some respite for the AUD/USD pair. Attention will shift on Friday to the release of the U.S. Nonfarm Payrolls (NFP) report for November, which is expected to influence market sentiment.
Domestic Data Paints Mixed Picture
Australia’s trade surplus for October rose to AUD 5.95 billion, up from a revised AUD 4.53 billion in September, surpassing forecasts of AUD 4.5 billion. However, quarterly economic growth remained sluggish. Gross Domestic Product (GDP) expanded by just 0.3% in Q3, slightly above Q2’s 0.2% growth but below the 0.4% consensus estimate.
In the services sector, Australia’s Judo Bank Services PMI showed improvement, climbing to 50.5 in November from 49.6 in October, indicating marginal expansion.
U.S. Data and Fed Sentiment
Meanwhile, the U.S. economy showed signs of softening. The ISM Services PMI dropped to 52.1 in November from 56.0 in October, falling short of the expected 55.5. Similarly, the S&P Global Composite PMI declined to 54.9 from 55.3, while the Services PMI slipped to 56.1 from 57.0, both missing forecasts.
Federal Reserve Chair Jerome Powell commented on Wednesday that the U.S. economy remains resilient, which may allow the Fed to slow the pace of rate cuts. San Francisco Fed President Mary Daly echoed this sentiment, emphasizing that the central bank remains focused on achieving its inflation and growth targets. Markets are currently pricing in a 77.5% chance of a quarter-point rate cut in December, according to the CME FedWatch Tool.
Technical Analysis: AUD/USD Retains Bearish Momentum
The AUD/USD pair continues to trade on a negative note, staying below the critical 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) remains weak at 37.70, reinforcing the pair’s bearish outlook.
If the pair sustains trading below the key support level of 0.6325, it could slide further to the October 3 low of 0.6285, with a potential drop to the psychological barrier of 0.6200. Conversely, a break above the resistance at 0.6512 could open the door to 0.6626, the 100-day EMA, with further gains targeting 0.6687, the November 7 high.
Market dynamics continue to hinge on upcoming economic data and central bank policy signals, with both bearish and recovery scenarios on the table for the AUD/USD pair.
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