The Australian Dollar (AUD) has recently faced downward pressure against the US Dollar (USD) due to rising geopolitical tensions in the Middle East, which have dampened risk appetite. Australia’s Trade Balance for August exceeded market expectations, standing at 5,644 million month-over-month. Both Exports and Imports declined slightly by 0.2% in August. Despite these numbers, the downside risk for the AUD may be limited due to the hawkish outlook surrounding the Reserve Bank of Australia (RBA) and the stimulus measures from China boosting commodity prices.
Traders should closely monitor key economic data from the US, including September’s ISM Services Purchasing Managers’ Index (PMI) and the weekly Initial Jobless Claims for the previous week. The CME FedWatch Tool indicates a 65.4% probability of a rate cut by the Federal Reserve in November. Additionally, the Israeli security cabinet is expected to give a strong response to the recent Iranian attack, which saw over 200 ballistic missiles and drone strikes launched on Israel.
Australia’s Judo Bank Services PMI in September posted a reading of 50.5, down from 52.5 in August, indicating slower growth in services activity. Meanwhile, the Composite PMI declined slightly to 49.6 in September. The Federal Reserve Bank of Richmond President Tom Barkin highlighted that the fight against inflation may not be over, as risks persist. The ADP Employment Change report showed an increase of 143,000 jobs in September, surpassing expectations. The AiG Industry Index and Manufacturing PMI also showed signs of improvement in September.
Technical analysis shows that the AUD/USD pair has moved below 0.6900, showing signs of weakening bullish bias. Resistance levels indicate a potential move towards the upper boundary of the channel at around 0.7020, while immediate support lies at the nine-day EMA level of 0.6865. As the AUD faces challenges, market sentiment, interest rates set by the RBA, the health of the Chinese economy, Iron Ore prices, Trade Balance, and other factors continue to influence its value.
In conclusion, the Australian Dollar’s performance against major currencies, including the US Dollar, is affected by various factors such as interest rates set by the RBA, Chinese economic health, Iron Ore prices, Trade Balance, and market sentiment. Despite recent geopolitical tensions and economic data, the AUD remains resilient due to positive indicators from the RBA and China. Traders should stay informed about key economic data releases and geopolitical developments that may impact the AUD in the near future.
