Australian dollar continues to lose ground after Westpac Consumer Confidence

VaselineSeptember 10, 2024

0 5 minutes read

Australian dollar continues to lose ground after Westpac Consumer Confidence

AUD/USD depreciates after Tuesday’s Westpac Consumer Confidence release.
Aussie downside could be limited due to bullish sentiment around 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 is extending its losses for a third straight day after Australia’s Westpac Consumer Confidence disaster released on Tuesday. In addition, 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 0.5% month-on-month in September, swinging from a 2.8% rise in August. Traders await data on China’s trade balance, 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, downside for the Australian dollar (AUD) could be limited due to dovish sentiment around the Reserve Bank of Australia (RBA). RBA Governor Michele Bullock said last week it was too early to consider rate cuts. The board does not anticipate being able to lower rates in the near term.

Daily Digest Market Movers: Aussie Dollar Extends Decline on Increased Risk Aversion

According to the CME FedWatch tool, markets fully anticipate a rate cut of at least 25 basis points (bps) by the Federal Reserve at its September meeting. The probability of a 50 bps rate cut fell slightly to 29.0%, down from 30.0% a week ago.
China’s consumer price index (CPI) rose 0.6 percent year-on-year in August from 0.5 percent in July, but below the market consensus of 0.7 percent. On a monthly basis, CPI inflation rose 0.4% in August, down from 0.5% in July and weaker than the estimate of 0.5%.
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, economic growth slow is not considered a sufficient reason. for a rate cut this year.
The US Bureau of Labor Statistics (BLS) reported that non-farm 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 percent, as expected, down from 4.3 percent the previous month.
Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee noted on Friday that Fed officials are beginning to align with broader market 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 rate Fed officials’ speeches on a scale of 0 to 10, rated Goolsbee’s comments as upbeat, assigning them a score of 3.2.

Technical analysis: The Australian dollar is testing 0.6650 near the lower boundary of the descending channel

AUD/USD is trading around 0.6650 on Tuesday. Daily chart analysis shows that the pair is descending along the lower boundary of the descending channel, suggesting a strengthening bearish bias. Additionally, the 14-day Relative Strength Index (RSI) breaks below the 50 level, confirming the continued bearish trend for the AUD/USD pair.

On the downside, the AUD/USD pair is targeting the lower limit of the descending channel around the 0.6630 level. A break below this level could strengthen the bearish trend and lead the pair to navigate in the region around the rebound support at 0.6575.

In terms of resistance, the AUD/USD pair may find the barrier around the nine-day exponential moving average (EMA) at the 0.6703 level. A break above this level could weaken the bearish trend and support the AUD/USD pair to test the upper limit of the descending channel around the 0.6750 level, followed by a seven-month high of 0.6798 reached on the 11 July.

AUD/USD: Daily chart

Australian Dollar PRICE Today

The table below shows the percentage change of the Australian Dollar (AUD) against the major listed currencies today. The Australian dollar was the weakest against the US dollar.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.00%	0.06%	0.17%	0.07%	0.13%	0.19%	0.02%
EURO	-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 the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the Australian dollar in the left column and move along the horizontal line to the US dollar, the percentage change shown in the box will be AUD (base)/USD (quote).

Australian Dollar FAQ

One of the most important 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 factor 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 Australia’s inflation, growth rate and trade. Balance. Market sentiment – whether investors are taking riskier assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk positive for the 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 aim 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 is relatively low. The RBA can also use quantitative easing and tightening to influence lending conditions, the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner, so the health of the Chinese economy has a major influence on the value of the Australian dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, increasing 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. Therefore, positive or negative surprises in China’s growth data often have a direct impact on the Australian dollar and its pairs.

Iron ore is Australia’s biggest export, accounting for $118 billion a year, according to 2021 data, with China as the main destination. Therefore, the price of iron ore can be a driver of the Australian dollar. Generally, if the price of iron ore rises, so does the AUD, as aggregate demand for the currency rises. The opposite is true if the price of iron ore falls. Higher iron ore prices also tend to result in a higher likelihood of a positive trade balance for Australia, which is also positive for the AUD.

The balance of trade, 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 only gain in value from the excess demand created by foreign buyers wanting to buy its exports over what it spends on buying its imports. A positive net trade balance therefore strengthens the AUD, with the opposite effect if the trade balance is negative.

VaselineSeptember 10, 2024

0 5 minutes read