Australian Dollar hovers around a psychological level after testing its recent high
- Australian Dollar sustains a bullish sentiment on the dovish outlook from the Fed.
- Australia’s recent data reveals the economy’s resilience, as highlighted by the figures released last week.
- Australian Trade Minister Don Farrell conveyed confidence that China will eliminate punitive tariffs on Australian wine.
- PBoC is scheduled to announce its Interest Rate Decision on Wednesday.
- Fed members’ comments on interest rate cut weigh on US Dollar.
The Australian Dollar (AUD) seems to continue its winning streak that began on Wednesday. The AUD/USD pair received upward support in anticipation of rate cuts by the Federal Reserve (Fed), which weighs on the US Dollar (USD).
Australia’s economy showcases resilience, buoyed by strong employment outcomes and increasing incomes, as data released last week indicates. Additionally, the enhanced Purchasing Managers Index (PMI) data for December has bolstered the Australian Dollar.
Traders are expected to observe the Meeting Minutes from the Reserve Bank of Australia (RBA) set to be released on Tuesday, alongside Building Permits and Housing Starts data from Australia. Furthermore, on Wednesday, the People’s Bank of China (PBoC) is scheduled to announce its Interest Rate Decision, adding to the key events influencing the Aussie Dollar.
Australian Trade Minister Don Farrell expressed confidence on Sky News TV that China will remove punitive tariffs on Australian wine. Notably, China has already lifted trade restrictions on the majority of Australian exports that had been previously imposed, indicating a gradual improvement in relations between the two countries.
The US Dollar Index (DXY) grapples to maintain its position after rebounding from a four-month low at 101.77 marked on Thursday. The DXY received support from the improved short-term yield on the US Treasury bond. The 2-year US bond yield improved to 4.48% on Friday.
Additionally, the moderate preliminary Purchasing Managers Index (PMI) for December contributed support for the USD. S&P Global Services PMI rose to 51.3 from 50.8 prior. While Manufacturing PMI declined to 48.2 from 49.4. Investors will focus on Consumer Confidence and Existing Home Sales Change on Wednesday.
However, the Greenback encounters challenges stemming from a weakened sentiment, primarily influenced by the Federal Open Market Committee’s (FOMC) dovish statement. Additionally, dovish remarks from various Fed members exert pressure on the Greenback.
Atlanta Fed President Raphael Bostic, on Friday, anticipated a potential interest rate cut in the third quarter of 2024 if inflation follows the expected trajectory. Furthermore, Chicago Fed President Austan Goolsbee did not rule out the possibility of a rate cut at the Fed’s meeting next March.
Daily Digest Market Movers: Australian Dollar seems hawkish as economy shows resilience
- The preliminary Judo Bank Composite PMI improved to 47.4 from the previous reading 46.2. The Manufacturing PMI for the same period registered 47.8, a slight increase from the prior figure of 47.7. Additionally, the Services PMI grew to 47.6 compared to the previous reading of 46.0.
- Australia’s Consumer Inflation Expectations for December eased at 4.5% against the previous figures of 4.9%.
- The seasonally adjusted Aussie Employment Change (Nov) improved substantially to 61.5K compared to the expected 11.0K. Unemployment Rate rose to 3.9% from 3.7% previously.
- The People’s Bank of China (PBoC) kept its 1-year Medium-term Lending Facility (MLF) rate unchanged at 2.5%. Additionally, PBoC injected 1.45 trillion Yuan to bolster bank liquidity as 650 billion Yuan worth of MLF loans were matured.
- The National Bureau of Statistics of China revealed that Industrial Production (YoY) improved to 6.6% in November from 4.6% prior, exceeding the market expectation of 5.6%. However, China Retail Sales (YoY) rose to 10.1% from 7.6% prior, falling short of the market consensus of a 12.5% rise.
- Federal Reserve (Fed) maintained interest rates at 5.5% in its December policy meeting as expected. Markets are now projecting three rate cuts for 2024.
- US Retail Sales (MoM) rose 0.3% in November, compared to the expected decline of 0.1%. Initial Jobless Claims for the week ending on December 8 came in at 202K against the 220K expected.
Technical Analysis: Australian Dollar hovers around the 0.6700 post testing recent high
The Australian Dollar hovers around 0.6700 on Monday, having recently tested a five-month high at 0.6728 on Friday. A prevailing bullish sentiment could propel the AUD/USD pair to surpass the recent high and approach the pivotal barrier at 0.6750. On the downside, noteworthy support lies at 0.6650, followed by the 23.6% Fibonacci retracement at 0.6619, and subsequently reaching the psychological support at 0.6600, aligned with the 21-day Exponential Moving Average (EMA) at 0.6597.
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 strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.08% | -0.12% | 0.01% | -0.14% | -0.05% | -0.30% | -0.06% | |
| EUR | 0.08% | -0.04% | 0.10% | -0.02% | 0.03% | -0.21% | 0.02% | |
| GBP | 0.13% | 0.04% | 0.14% | -0.01% | 0.08% | -0.17% | 0.07% | |
| CAD | -0.01% | -0.10% | -0.15% | -0.16% | -0.07% | -0.32% | -0.08% | |
| AUD | 0.14% | 0.06% | 0.02% | 0.16% | 0.09% | -0.16% | 0.08% | |
| JPY | 0.06% | -0.02% | -0.05% | 0.08% | -0.06% | -0.22% | -0.01% | |
| NZD | 0.30% | 0.21% | 0.18% | 0.32% | 0.16% | 0.25% | 0.23% | |
| CHF | 0.06% | -0.02% | -0.06% | 0.08% | -0.08% | 0.01% | -0.24% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (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.