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Australian Dollar retraces its recent losses on subdued US Dollar

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  • Australian Dollar recovers ground as the Greenback snaps recent gains.
  • Australia’s Judo Bank Manufacturing PMI fell to 47.7 from the previous reading of 48.2.
  • China’s Manufacturing PMI improved to 50.7 against the expected decline to 49.8 from 49.5 prior.
  • US Core PCE Price Index YoY and MoM eased at 3.5% and 0.2%, respectively.

The Australian Dollar (AUD) manages to halt a two-day losing streak on Friday. However, the recovery in the US Dollar contributed a pressure on the AUD/USD pair. Furthermore, disappointing Chinese data on Thursday exerted downward pressure on market sentiment, causing the China-linked Australian Dollar (AUD) to decline.

Australia’s Judo Bank Manufacturing PMI for November met expectations at 47.7, showing a slight dip from the previous reading of 48.2. The Reserve Bank of Australia is set to release the RBA Commodity Index SDR later today. This data holds significance as it serves as an early indicator of changes in export prices, thereby influencing both GDP and the value of the AUD.

China’s Caixin Manufacturing PMI exceeded expectations by improving to 50.7 in November, defying the anticipated decline to 49.8 from the previous reading of 49.5. This positive surprise in the data has the potential to provide support and bolster the Australian Dollar, given the interconnected economic dynamics between China and Australia.

The US Dollar Index (DXY) surged as the US Treasury bond yield edged higher, with the 2 and 10-year Treasury yields reached at 4.73% and 4.36%, respectively on Thursday. Furthermore, the Greenback might have found support in economic data from the United States (US).

US Core Personal Consumption Expenditures Price Index (PCE) showed a year-on-year easing to 3.5% in October from the previous reading of 3.7%, aligning with expectations. The month-on-month Core PCE Price Index decreased to 0.2% from the prior 0.3%. Additionally, Initial Jobless Claims for the week ending November 24 totaled 218K, slightly below the anticipated 220K but higher than the revised previous figures of 211K (revised from 209K).

Daily Digest Market Movers: Australian Dollar gains ground on subdued US Dollar

  • Australia’s Private Capital Expenditure experienced a decline of 0.6% in Q3, contrasting with the previous growth of 2.8%. This contraction fell short of the expected rise of 1.0%.
  • Aussie Monthly Consumer Price Index (CPI) for October shows a reading of 4.9%, a decrease from the previous reading of 5.6% in September and slightly below the expected 5.2%.
  • Reserve Bank of Australia (RBA) Governor Michele Bullock highlighted that the current monetary policy is on the restrictive side, with rate hikes putting a damper on demand, particularly in the context of persistent services inflation.
  • Governor Bullock emphasized the need for caution in employing high interest rates to combat inflation without inadvertently raising the unemployment rate.
  • China’s NBS Manufacturing PMI for November decreased to 49.4 from the previous reading of 49.5. The market expectation was for an increase to 49.7. The Non-Manufacturing PMI contracted to 50.2, falling short of the expected 51.1 and the previous reading of 50.6.
  • US Gross Domestic Product Annualized increased by 5.2% during the third quarter from the previous reading of 4.9%, above the market consensus of 5.0.
  • The latest Fed’s Beige Book unveiled that the demand for labor has been “continuing to ease” over the weeks leading up to mid-November.

Technical Analysis: Australian Dollar maintains its position below the 0.6650 resistance level

The Australian Dollar trades higher around 0.6620 on Friday. The immediate hurdle appears to be the significant level at 0.6650, with November’s high at 0.6676 following closely. If the pair successfully surpasses this level, it could pave the way for a test of the substantial resistance at the psychological mark of 0.6700, and beyond that, the August high at 0.6723. Conversely, on the downside, a critical support zone is situated around the psychological level of 0.6600, aligning with the seven-day Exponential Moving Average (EMA) at 0.6599. A clear breach below the EMA might lead the pair towards support near the 23.6% Fibonacci retracement level at 0.6580, followed by the major level at 0.6550.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.14% -0.19% -0.13% -0.29% -0.19% -0.51% -0.06%
EUR 0.14%   -0.07% 0.00% -0.16% -0.07% -0.39% 0.08%
GBP 0.19% 0.05%   -0.01% -0.12% -0.01% -0.34% 0.12%
CAD 0.14% 0.01% -0.05%   -0.15% -0.06% -0.39% 0.09%
AUD 0.29% 0.17% 0.10% 0.17%   0.10% -0.22% 0.25%
JPY 0.19% 0.06% -0.01% 0.07% -0.10%   -0.34% 0.14%
NZD 0.51% 0.38% 0.32% 0.38% 0.22% 0.32%   0.46%
CHF 0.06% -0.08% -0.13% -0.08% -0.24% -0.16% -0.47%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

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