Australian Dollar extends gains on third day, US Nonfarm Payrolls eyed – Crypto News – Crypto News
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AUD/USD is volatile around the Powell speech, but focus is on downside while below 0.7000 AUD/USD is volatile around the Powell speech, but focus is on downside while below 0.7000

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Australian Dollar extends gains on third day, US Nonfarm Payrolls eyed – Crypto News

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  • Australian Dollar experienced positive momentum due to the correction in the US Dollar.
  • Australia’s FSR report stated that Australian banks remain well-positioned despite elevated global and domestic risks.
  • Investors await the US NFP report, seeking confirmation of a tight labor market.

The Australian Dollar (AUD) extends gains on the third successive day. The Aussie pair gained support from the correction in the US Dollar (USD) following a decline in US Treasury yields.

Australia’s report for October 2023, Financial Stability Review (FSR) from the Reserve Bank of Australia (RBA) indicates elevated global financial stability risks due to challenging macroeconomic conditions.

The rise in inflation and interest rates since 2021 has strained household and business finances not only in Australia but also globally. Prolonged high levels of inflation and interest rates pose a risk of significant credit quality deterioration, potentially leading lenders to reduce credit provision.

However, the report mentioned that Australian banks remain well-positioned to continue supplying credit to the economy despite elevated global and domestic risks.

Moreover, a November meeting between President Biden and Chinese leader Xi Jinping in San Francisco is in the works, signaling an effort to stabilize relations between the world’s top two economies.

This potential summit follows their last meeting in Bali, Indonesia, in November last year, where both leaders stressed the importance of face-to-face diplomacy and expressed hope for the reconstruction of US-China relations.

The US Dollar Index (DXY) attempts to snap the two-day losing streak. The index continued to correct from an 11-month high due to a decline in the US Treasury yields. However, the unemployment data on Thursday showed a tight labor market in the United States (US). The upcoming US Nonfarm Payrolls and Average Hourly Earnings will be eyed on Friday for further confirmation.

Daily Digest Market Movers: Australian Dollar consolidates ahead of US Nonfarm Payrolls

  • RBA’s FSR report affirms that Australian banks are in a robust position to maintain credit supply to the economy, even amid heightened global and domestic risks.
  • Australia’s Trade Balance (MoM) showed improvement in August, reaching 9,640 million, surpassing market expectations of 8,725 million. July’s reading stood at 8,039 million.
  • Australia’s central bank could go for a rate hike, with expectations pointing toward a peak of 4.35% by the end of the year. This projection aligns with the persistent elevation of inflation above the target.
  • Michele Bullock, the newly appointed governor of the RBA, in her inaugural monetary policy statement following the interest rate decision, emphasized the need for additional tightening of monetary policy.
  • Bullock noted that recent data align with the return of inflation to the target range. While inflation in Australia has peaked, it remains elevated and is expected to persist for a while.
  • US Initial Jobless Claims for the week ending September 29, increased to 207K from the previous reading of 205K, beating the market expectation of 210K. This suggests that labor market conditions continue to be tight.
  • US Challenger Job Cuts have come down significantly from the previous figure of 75.151K to 47.457K in September.
  • The 10-year US Treasury yield stands above 4.70%, close to the highest level since 2007.
  • Traders await the upcoming US Nonfarm Payrolls and Average Hourly Earnings on Friday. Upbeat numbers could trigger more USD gains and increase volatility in the bond market.

Technical Analysis: Australian Dollar holds ground above 0.6350, 21-day EMA emerges as the immediate barrier

Australian Dollar hovers around 0.6380 against the US Dollar on Friday. The 21-day Exponential Moving Average (EMA) appears to be a key barrier lined up with the 0.6400 psychological level. A firm break above the latter could open the doors for the pair to explore levels around the 23.6% Fibonacci retracement at 0.6429 level. On the downside, the major level at 0.6300 emerges as the immediate support, followed by November’s low at 0.6272.

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 Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.01% 0.01% 0.00% -0.15% 0.11% -0.01% 0.02%
EUR 0.00%   0.00% -0.01% -0.17% 0.09% 0.00% 0.02%
GBP -0.01% 0.00%   -0.01% -0.16% 0.09% -0.01% 0.02%
CAD 0.01% 0.01% 0.01%   -0.16% 0.11% -0.01% 0.02%
AUD 0.14% 0.15% 0.15% 0.14%   0.25% 0.16% 0.17%
JPY -0.11% -0.09% -0.08% -0.12% -0.26%   -0.11% -0.07%
NZD 0.02% 0.03% 0.03% 0.02% -0.14% 0.13%   0.03%
CHF -0.03% -0.02% -0.01% -0.02% -0.18% 0.07% -0.04%  

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).

 

RBA FAQs

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

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