Australian Dollar continues to lose ground after Westpac Consumer Confidence
- AUD/USD depreciates following the release of downbeat Westpac Consumer Confidence on Tuesday.
- The Australian Dollar’s downside could be restrained due to the hawkish sentiment surrounding the RBA.
- The US Dollar received support as recent labor data reduced the likelihood of an aggressive Fed rate cut in September.
The AUD/USD pair extends its losses for the third successive day following the downbeat Westpac Consumer Confidence from Australia released on Tuesday. Additionally, the US Dollar received support as a recent US labor market report raised uncertainty over the likelihood of an aggressive interest rate cut by the Federal Reserve (Fed) at its September meeting.
Australia’s Westpac Consumer Confidence fell by 0.5% month-on-month in September, swinging from a 2.8% gain in August. Traders await China’s Trade Balance data scheduled to be released later in the day. Given the close trade relationship between Australia and China, any changes in the Chinese economy could have a significant impact on Australian markets.
However, the downside of the Australian Dollar (AUD) could be limited due to the hawkish sentiment surrounding the Reserve Bank of Australia (RBA). The RBA Governor Michele Bullock stated last week that it is too early to consider rate cuts. The board does not anticipate being able to reduce rates in the near term.
Daily Digest Market Movers: Australian Dollar extends decline due to increasing risk aversion
- According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting. The likelihood of a 50 bps rate cut has slightly decreased to 29.0%, down from 30.0% a week ago.
- China’s Consumer Price Index (CPI) rose by 0.6% year-on-year in August, up from 0.5% in July but below the market consensus of 0.7%. On a monthly basis, CPI inflation increased by 0.4% in August, down from 0.5% in July and worse than the 0.5% estimate.
- RBC Capital Markets now expects the Reserve Bank of Australia to implement a rate cut at its February 2025 meeting, earlier than its previous forecast of May 2025. Despite inflation in Australia remaining elevated above the RBA’s target, slower economic growth is not considered a sufficient reason for a rate cut this year.
- The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) added 142,000 jobs in August, below the forecast of 160,000 but an improvement from July’s downwardly revised figure of 89,000. Meanwhile, the Unemployment Rate fell to 4.2%, as expected, down from 4.3% in the previous month.
- Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee remarked on Friday that Fed officials are starting to align with the broader market’s sentiment that a policy rate adjustment by the US central bank is imminent, according to CNBC. FXStreet’s FedTracker, which uses a custom AI model to evaluate Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10, rated Goolsbee’s comments as dovish, assigning them a score of 3.2.
Technical Analysis: Australian Dollar tests 0.6650 near the lower boundary of descending channel
The AUD/USD pair trades around 0.6650 on Tuesday. The daily chart analysis shows that the pair is trekking down along the lower boundary of the descending channel, suggesting the reinforcing of a bearish bias. Additionally, the 14-day Relative Strength Index (RSI) falls below the 50 level, confirming the ongoing bearish trend for the AUD/USD pair.
On the downside, the AUD/USD pair targets the lower boundary of the descending channel around the level of 0.6630. A break below this level could strengthen the bearish bias and lead the pair to navigate the region around the throwback support at 0.6575.
Regarding resistance, the AUD/USD pair may find the barrier around the nine-day Exponential Moving Average (EMA) at the 0.6703 level. A breakthrough above this level could weaken the bearish bias and support the AUD/USD pair to test the upper boundary of the descending channel around the 0.6750 level, followed by a seven-month high of 0.6798, reached on July 11.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | 0.06% | 0.17% | 0.07% | 0.13% | 0.19% | 0.02% | |
| EUR | -0.01% | 0.06% | 0.16% | 0.06% | 0.11% | 0.13% | 0.01% | |
| GBP | -0.06% | -0.06% | 0.09% | -0.03% | 0.07% | 0.09% | -0.02% | |
| JPY | -0.17% | -0.16% | -0.09% | -0.12% | -0.05% | -0.02% | -0.15% | |
| CAD | -0.07% | -0.06% | 0.03% | 0.12% | 0.05% | 0.12% | -0.03% | |
| AUD | -0.13% | -0.11% | -0.07% | 0.05% | -0.05% | 0.04% | -0.09% | |
| NZD | -0.19% | -0.13% | -0.09% | 0.02% | -0.12% | -0.04% | -0.13% | |
| CHF | -0.02% | -0.01% | 0.02% | 0.15% | 0.03% | 0.09% | 0.13% |
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.