The Australian Dollar has shown resilience following the latest Purchasing Managers Index (PMI) data release on Thursday. Australia’s Judo Bank Services PMI rose slightly to 50.6 in October, marking the ninth consecutive month of growth. This positive signal comes amid a broader economic backdrop where the Federal Reserve’s Beige Book indicated that economic activity has remained largely unchanged across most Districts.
On Thursday, the Australian Dollar (AUD) appreciated against the US Dollar (USD), partly due to a modest dip in US Treasury yields, which has put additional pressure on the USD. As of the latest figures, the two-year and ten-year US Treasury yields stood at 4.07% and 4.23%, respectively. The hawkish sentiment surrounding the Reserve Bank of Australia (RBA) is also supporting the AUD, particularly following positive employment figures. Recent comments from RBA officials highlighted favorable labor participation rates, emphasizing a cautious yet optimistic outlook.
The USD faced challenges after the release of the Federal Reserve’s Beige Book, which reported little change in economic activity compared to August, where some Districts had noted growth. According to market observations, there is an increasing likelihood of a 25-basis-point rate cut, with expectations of gradual reductions rather than aggressive adjustments in monetary policy over the coming quarters.
In international developments, the People’s Bank of China lowered its Loan Prime Rates in a move aimed at stimulating domestic economic activity, which could boost demand for Australian exports. This aligns with forecasts from the National Australia Bank, which now expects the RBA to initiate rate cuts earlier than previously anticipated, projecting the first reduction in February 2025.
Currently, the AUD/USD pair is trading around 0.6640. Technical analysis indicates a bearish outlook in the short term, with the pair remaining below the nine-day Exponential Moving Average (EMA). A potential retest of the two-month low at 0.6614 could occur, and key psychological support is identified at the 0.6600 level. On the upside, resistance is anticipated at the nine-day EMA around 0.6680, with further resistance at the 50-day EMA at 0.6728. A breakthrough of these resistance levels may set the stage for movement toward the 0.6800 level.
