The Australian Dollar (AUD) experienced a surge in value against the US Dollar (USD) on Friday, driven by an improved risk-on sentiment. Traders eagerly awaited Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Symposium to gain further insight into the market’s future trajectory.
The AUD/USD pair is poised to continue appreciating, supported by the hawkish sentiment surrounding the Reserve Bank of Australia (RBA) and its policy outlook. RBA Governor Michele Bullock recently stated that the central bank is prepared to raise rates to combat inflation if necessary. Moreover, the RBA’s August Meeting Minutes indicated that the cash rate is likely to remain unchanged for an extended period.
Conversely, the US Dollar (USD) experienced a decline as Treasury yields weakened. However, the Greenback received some support from mixed S&P Global Purchasing Managers Index (PMI) data released on Thursday, showing that US business activity continues to grow, marking 19 consecutive months of expansion.
In the global market scene, the CME FedWatch Tool highlighted that the markets are increasingly pricing in a 25 basis point rate cut by the Fed in its September meeting, demonstrating the evolving sentiment towards monetary policy. Additionally, the S&P Global US Services PMI for August defied expectations, indicating a positive trend in the sector, despite a slight contraction in manufacturing activity.
Australian economic indicators also showed positive signs, with the Judo Bank Composite Purchasing Managers Index (PMI) and Services PMI both recording growth in August. These reports indicate a stronger performance in the services sector, although manufacturing production experienced a slight contraction.
In the technical analysis realm, the Australian Dollar rebounded from the 0.6700 level, moving back into an ascending channel. The AUD/USD pair is currently trading around 0.6710, with the potential to test the upper boundary of the channel at 0.6740. A return to the ascending channel could lead to further bullish momentum, potentially reaching the seven-month high of 0.6798.
Overall, the Australian Dollar’s performance against major currencies is influenced by various factors such as interest rates set by the RBA, the price of Iron Ore (Australia’s largest export), the health of the Chinese economy, inflation rate, and trade balance. Positive market sentiment, influenced by risk-on behavior, is also a key driver for the AUD’s value in the forex market.
