The Australian Dollar (AUD) is facing continued downward pressure, marking its sixth consecutive session of decline and approaching three-month lows against the US Dollar (USD). This trend stems primarily from disappointing economic data out of Australia. The Reserve Bank of Australia’s (RBA) Governor Michele Bullock indicated that current interest rates will remain steady until the RBA has more confidence in the inflation outlook.
While the RBA’s position appears less dovish than previous statements, the overall sentiment surrounding the AUD is cautious. Governor Bullock emphasized that the existing interest rates are adequately restrictive, maintaining stability in the face of inflation uncertainties. This backdrop provides a complex environment for the AUD, which struggles against a robust US dollar.
The US Dollar has remained stable, with the US Dollar Index reflecting a strong performance near its 2024 highs. Market attention is directed towards upcoming US economic data, specifically the October Retail Sales figures and insights from Federal Reserve officials. Recent comments from Federal Reserve Chair Jerome Powell noted the relative strength of the US economy, which allows for a gradual easing of interest rates.
Further contributing to market dynamics, the US Producer Price Index (PPI) saw a year-over-year increase of 2.4% in October, surpassing expectations. In contrast, Australia’s unemployment rate held steady at 4.1%, but employment growth fell short, with only 15.9K new jobs created compared to a forecast of 25.0K.
The Australian inflation outlook is showing signs of moderation, with consumer inflation expectations declining to 3.8%, the lowest since October 2021. Meanwhile, ongoing economic developments in China, which are generating mixed reactions among investors, continue to impact demand for Australian exports, further pressuring the AUD.
Technical indicators suggest that the AUD/USD pair is nearing critical support levels around 0.6400. A drop beneath this level could intensify selling pressure, pushing the pair toward its yearly low. Conversely, resistance around 0.6500 and above may provide some uplift, but will require solid breaks of key moving averages to signal any potential recovery.
