The Australian Dollar (AUD) is experiencing upward momentum against the US Dollar (USD), buoyed by hawkish sentiment regarding the Reserve Bank of Australia’s (RBA) monetary policy. Anticipation is building that the RBA will maintain the Official Cash Rate at 4.35% during its upcoming decision, supported by robust labor data and persistent inflationary pressures.
In a notable development, the People’s Bank of China (PBoC) has also injected liquidity into its banking system, with CNY 74.5 billion through a 14-day reverse repo and an additional CNY 160.1 billion via a 7-day reverse repo. This infusion is aimed at stabilizing the Chinese economy, from which Australia derives considerable economic influence due to their close trade ties. As a result, the AUD/USD pair remains resilient even in the face of disappointing Purchasing Managers Index (PMI) data from Australia.
The Australian Judo Bank Composite PMI fell to 49.8 in September, indicating a contraction in business activity after a retreat from 51.7 in August. The services sector’s growth could not offset a significant downturn in manufacturing, where the Manufacturing PMI dropped to 46.7. This broad decline comes despite Australian employment data showing an increase of 47.5K in August, significantly exceeding expectations.
Amid these fluctuations, the US Dollar could be poised for depreciation, as forthcoming rate cuts from Federal Reserve policymakers are anticipated. This follows a recent decision to lower rates by 50 basis points to a range of 4.75% to 5.00%.
As market participants assess future movements, the AUD/USD pair is currently trading near 0.6820, probing the lower limit of its recent ascending channel. A rebound from this level could push the pair toward higher resistance near 0.6890, while a drop below the crucial support at 0.6700 could signal a deeper decline towards recent lows.
