The Australian Dollar (AUD) continues to strengthen against the US Dollar, primarily driven by a divergent policy outlook between the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed). Despite mixed data from China, Australia’s largest trading partner, the AUD remains resilient. The recent decline in China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) in September indicates a contraction, while the US Dollar weakens due to lower than expected US Core Personal Consumption Expenditures (PCE) Price Index data for August.
Federal Reserve Chair Jerome Powell’s upcoming speech on Monday is anticipated to provide further insights into the Fed’s monetary policy stance, which could impact currency markets. The CME FedWatch Tool suggests the possibility of a 25 or 50 basis point rate cut by the Fed in November, further affecting the USD and supporting the AUD/USD pair.
The Reserve Bank of Australia’s hawkish stance, as evidenced by maintaining the cash rate at 4.35% for seven consecutive meetings, contributes to the strength of the Australian Dollar. Additionally, comments from St. Louis Federal Reserve President Alberto Musalem indicate the potential for further rate cuts by the Fed. Australian Treasurer Jim Chalmers’ discussions with Chinese authorities highlight concerns about global growth, while the US economy’s GDP data shows steady growth in the second quarter.
Technical analysis of the AUD/USD pair suggests a bullish momentum, with the pair trading near 0.6920 and above the lower boundary of an ascending channel pattern. Resistance levels could be tested near 0.7000, while a failure to break through may result in a pullback. On the downside, a breach of the lower boundary could lead to a test of the nine-day Exponential Moving Average (EMA) at 0.6853.
The Australian Dollar’s performance against major currencies today shows strength against the Japanese Yen. The economic indicator to watch is Fed Chair Jerome Powell’s speech on Monday, which could provide further clarity on the Fed’s policy direction. Overall, the AUD remains supported by a strong RBA stance and dovish expectations from the Fed, influencing its performance in the foreign exchange markets.
