Australian Dollar trades with mild losses, investors await RBA rate decision
- Australian Dollar trades with mild negative bias in Tuesday’s Asian session.
- The RBA is expected to leave the key interest rate unchanged at 4.35% for the fifth consecutive meeting in June.
- If RBA’s Bullock retains her hawkish rhetoric during the press conference, this could lift the Aussie against the US Dollar.
The Australian Dollar (AUD) loses ground on Tuesday on the modest rebound of the US Dollar (USD). The markets turn cautious ahead of the Reserve Bank of Australia (RBA) monetary policy meeting on Tuesday. The RBA is anticipated to hold the Official Cash Rate (OCR) steady at 4.35% for the fifth meeting in a row in June. Traders will take more cues from RBA Governor Michele Bullock’s press conference. The hawkish tone from the RBA statement could boost the Australian Dollar (AUD), while the failure to affirm the hawkish expectations could exert some selling pressure on the Aussie against the Greenback.
Investors will keep an eye on US Retail Sales and Industrial Production for May. The Federal Reserve’s (Fed) Lisa Cook, Thomas Barkin, Adriana Kugler, Lorie Logan, Alberto Musalem and Austan Goolsbee are set to speak later on Tuesday. The stronger-than-expected data could boost the USD and create a headwind for AUD/USD.
Daily Digest Market Movers: Australian Dollar weakens ahead of RBA interest rate decision
- “The stronger than expected Q1 CPI also makes it hard to see the RBA being sufficiently confident that inflation will return to and stay in the band by the time the November meeting comes around,” said ANZ head of Australian economics Adam Boyton.
- Philadelphia Fed President Patrick Harker said on Monday that one interest-rate cut is appropriate for this year if the US economy performed as expected. Harker further stated that he’d like to see “several” evidence of improving inflation, per Bloomberg.
- The US NY Empire State Manufacturing Index improved to -6.0 in June from -15.6. in the previous reading, above the consensus of -9.0. The index has remained in contractionary territory since November 2023.
- Financial markets have priced in a nearly 62% odds rate cut from the US Fed on September 18, according to the CME’s FedWatch Tool.
Technical Analysis: AUD/USD hovers around the key 100-day EMA
The Australian Dollar trades on a softer note on the day. The bullish stance of the AUD/USD pair remains fragile as it hovers around the key 100-day Exponential Moving Average (EMA) on the daily chart. The pair could resume its downside trajectory if it crosses below the key EMA, as mentioned. Furthermore, the 14-day Relative Strength Index (RSI) remains below the 50-midline, supporting the sellers for the time being.
The potential downside target for AUD/USD will emerge near the confluence of the 100-day EMA and the lower limit of the Bollinger Band in the 0.6580-0.6585 zone. Extended losses will pave the way to 0.6510, a low of March 22. The next contention level is seen at 0.6465, a low of May 1.
On the other hand, the first upside barrier is located at 0.6684, the upper boundary of the Bollinger Band. A decisive break above the mentioned level will see a rally to 0.6715, a high of May 16. Further north, the next resistance level to watch is 0.6760, a high of January 4.
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 | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.14% | 0.14% | 0.15% | 0.10% | -0.07% | 0.13% | 0.12% | |
| EUR | -0.14% | 0.01% | 0.00% | -0.06% | -0.19% | 0.01% | -0.03% | |
| GBP | -0.14% | 0.02% | 0.01% | -0.04% | -0.18% | 0.02% | -0.01% | |
| CAD | -0.14% | 0.00% | -0.01% | -0.05% | -0.19% | 0.02% | -0.02% | |
| AUD | -0.09% | 0.07% | 0.04% | 0.05% | -0.14% | 0.06% | 0.02% | |
| JPY | 0.06% | 0.20% | 0.18% | 0.19% | 0.15% | 0.21% | 0.17% | |
| NZD | -0.15% | -0.01% | -0.02% | -0.01% | -0.06% | -0.20% | -0.03% | |
| CHF | -0.10% | 0.03% | 0.03% | 0.03% | -0.01% | -0.16% | 0.05% |
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.