The Australian Dollar (AUD) experienced a decline against the US Dollar (USD) after two days of gains due to lower-than-expected Consumer Price Index (CPI) data from China, its largest trading partner. The Commonwealth Bank of Australia predicted a 25 basis point rate cut by the Reserve Bank of Australia (RBA) by the end of 2024, further putting pressure on the AUD. Additionally, expectations of the US Federal Reserve (Fed) slowing the pace of borrowing cost reductions boosted the USD, contributing to the decline of the AUD/USD pair.
The AUD/USD pair faced downward pressure amidst escalating tensions in the Middle East, leading to concerns of a broader regional conflict. China’s National Bureau of Statistics reported that the monthly CPI remained unchanged at 0% in September, falling short of expectations. Moreover, the MoF in China emphasized priorities to stabilize the property market and tackle local government debt issues through issuing special bonds. The US Producer Price Index (PPI) for September also remained unchanged at 0%, with positive remarks on inflation and labor market progress from Chicago Fed President Austan Goolsbee.
Technical analysis of the AUD/USD pair indicated a potential shift from bearish to bullish bias as it tested the upper boundary of the descending channel. The 14-day Relative Strength Index (RSI) below 50 suggested ongoing bearish momentum. Resistance levels for the pair were identified at the nine-day Exponential Moving Average (EMA) and the psychological level of 0.6800, while support levels lay near the lower boundary of the channel and the eight-week low recorded in September.
Market data showed the AUD as the weakest against the British Pound among major currencies on the day, with percentage changes displayed in a heat map format. Factors influencing the Australian Dollar include interest rates set by the RBA, price of Iron Ore, Chinese economic health, inflation, growth rate, Trade Balance, and market sentiment. The RBA’s interest rate decisions play a crucial role in shaping the AUD, along with China as the largest trading partner affecting demand for Australian exports and the value of the currency.
In conclusion, the Australian Dollar faced downward pressure against the US Dollar due to lower CPI data from China and expectations of a rate cut by the RBA. The USD’s strength from anticipated Fed actions also contributed to the AUD’s decline. Various factors, including geopolitical tensions, Chinese economic data, and market sentiment, impact the value of the Australian Dollar, highlighting the interconnected nature of global currency markets.
