- The Australian Dollar falls as the US Dollar remains solid amid a resilient US economy.
- The Aussie Dollar may limit its downside as an RBA rate cut is unlikely in the near term.
- The US Dollar appreciates as recent positive US data supports the sentiment of nominal rate cuts by the Fed.
The Australian Dollar (AUD) extends its decline against the US Dollar (USD) for the third consecutive session on Tuesday. Traders are now focused on Australia’s third-quarter Consumer Price Index (CPI) data, due for release on Wednesday, as they seek further insights into the Reserve Bank of Australia’s (RBA) potential monetary policy direction.
The AUD’s downside may be limited by the Reserve Bank of Australia’s hawkish stance on its policy outlook. The RBA has indicated that the current cash rate of 4.35% is restrictive enough to steer inflation back within the target range of 2%-3% while still supporting employment. Consequently, a rate cut is unlikely in the near term, especially as early as next month.
The US Dollar (USD) gains strength as positive US economic data from last week indicates continued resilience in the economy. This supports the sentiment of nominal interest rate cuts by the Federal Reserve (Fed) in November.
Traders await the release of the preliminary US Q3 Gross Domestic Product (GDP) figures and October’s Nonfarm Payrolls (NFP) report, which could provide key insights into the timing and pace of the Federal Reserve’s (Fed) anticipated rate cuts.
Daily Digest Market Movers: Australian Dollar depreciates as US Dollar gains ground
- According to the CME FedWatch Tool, there is a 95.8% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a more substantial 50-basis-point cut.
- ANZ-Roy Morgan Australia Consumer Confidence dropped to 86.4 this week, down from 87.5 the previous week.
- Australia’s 10-year government bond yield hovers near 4.5%, mirroring a rise in US bond yields. This increase is driven by market sentiment increasingly favoring Former President Donald Trump in the upcoming US presidential election and expectations that the Fed may adopt a more cautious stance on future rate cuts.
- According to polling site FiveThirtyEight, Trump’s possibility of winning the US election has increased to 52% compared to 48% for Vice President Kamala Harris.
- Over the past three weeks, allies of former President Donald Trump have faced at least 10 court defeats in key battleground states that could impact the outcome of the November 5 election between Republican candidate Trump and his Democratic opponent, Vice President Kamala Harris.
- Recent comments from Iran’s Foreign Ministry spokesperson, Esmaeil Baghaei, about potentially using “all available tools” to respond to Israel’s recent attacks on military targets in Iran, signal a risk of further escalation. Such statements increase global uncertainty, fueling investor demand for safe-haven assets like the USD as they brace for potential conflict.
- Last week, Federal Reserve Bank of San Francisco President Mary Daly stated in a post on the social media platform X that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.
- RBA Deputy Governor Andrew Hauser highlighted the country’s strong labor participation rate last week and stressed that although the RBA relies on data, it is not overly fixated on it.
Technical Analysis: Australian Dollar falls toward 0.6550, lower boundary of the descending channel
AUD/USD trades near 0.6570 on Tuesday. The daily chart analysis points to a short-term bearish bias as the pair continues to move lower within a descending channel. The 14-day Relative Strength Index (RSI) is nearing 30, reinforcing the bearish bias.
On the support side, the pair could test the lower boundary of the descending channel around the 0.6540 level.
For resistance, the first hurdle lies at the psychological level of 0.6600, followed by the descending channel’s upper boundary at 0.6610. A breakout above this point could open the door for a move toward the nine-day Exponential Moving Average (EMA) at 0.6634.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | 0.03% | -0.11% | 0.01% | 0.09% | 0.04% | -0.03% | |
| EUR | -0.00% | 0.02% | -0.12% | 0.02% | 0.08% | 0.04% | -0.00% | |
| GBP | -0.03% | -0.02% | -0.14% | -0.01% | 0.06% | 0.00% | -0.03% | |
| JPY | 0.11% | 0.12% | 0.14% | 0.13% | 0.20% | 0.13% | 0.12% | |
| CAD | -0.01% | -0.02% | 0.00% | -0.13% | 0.07% | 0.02% | -0.02% | |
| AUD | -0.09% | -0.08% | -0.06% | -0.20% | -0.07% | -0.05% | -0.11% | |
| NZD | -0.04% | -0.04% | -0.01% | -0.13% | -0.02% | 0.05% | -0.06% | |
| CHF | 0.03% | 0.00% | 0.03% | -0.12% | 0.02% | 0.11% | 0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
