Australian Dollar hovers below a major level amid stable US Dollar, US data eyed – Crypto News – Crypto News
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AUD/USD retreats from one-week highs, remains strong above 0.6820 AUD/USD retreats from one-week highs, remains strong above 0.6820

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Australian Dollar hovers below a major level amid stable US Dollar, US data eyed – Crypto News

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  • Australian Dollar gains ground amid weaker US Dollar.
  • Australian central bank’s future interest rate decisions will be data-dependent.
  • Downbeat US economic data reinforces the bets on a dovish Fed outlook.

The Australian Dollar (AUD) retraces its recent losses on Friday, benefiting from a subdued US Dollar (USD). The AUD/USD pair experienced losses in the previous session as the Greenback gained some ground, possibly linked to upbeat US Treasury yields. However, the Aussie Dollar shows strength on the back of improved risk appetite, as market participants anticipate a dovish stance from the Federal Reserve (Fed) concerning interest rates in early 2024.

Australia’s recent meeting minutes highlighted the Reserve Bank of Australia’s (RBA) emphasis on carefully examining additional data to assess the balance of risks before making future interest rate decisions. The resilience displayed in inflation and housing prices is a crucial factor in this assessment. The RBA’s forecast approaching the upper boundary of the 2-3% inflation target by the end of 2025 indicates a cautious but optimistic outlook. The expectation that the RBA will likely avoid a rate cut in the upcoming February policy meeting provides support for keeping the Australian Dollar (AUD) higher.

The US Dollar Index (DXY) posted gains on Thursday, although less-than-optimistic US data may have curbed the Greenback’s ascent, potentially influencing the Federal Reserve to take a more cautious stance in upcoming monetary policy decisions. The unexpected rise in US Initial Jobless Claims to 218K for the week ending December 23, surpassing the expected 210K, and the unchanged Pending Home Sales (MoM) at 0.0% in November against the anticipated 1.0% increase, contribute to this narrative. Traders are now keeping a close eye on Friday’s release of the Chicago Purchasing Managers’ Index for December for further insights.

Daily Digest Market Movers: Australian Dollar improves on risk appetite, hawkish RBA

  • RBA Private Sector Credit (MoM) demonstrated a 0.4% increase in November, surpassing the previous rise of 0.3%. However, the Year-over-Year data indicated a decrease of 4.7%, compared to the previous 4.8% rise.
  • RBA highlighted the examination of additional data to assess the balance of risks before deciding on future interest rates in its recent Meeting Minutes.
  • China’s National Development and Reform Commission’s (NDRC) Chairman, Zheng Shanjie, mentioned in a meeting held on Tuesday that China will strive to expand domestic demand, ensuring a speedy economic recovery, and promoting stable growth.
  • China’s year-on-year Industrial Profits for January to November registered a decline of 4.4%, indicating a slowdown and highlighting the need for additional policy support from Beijing to bolster growth in the world’s second-largest economy.
  • Former Dallas Federal Reserve President Robert Kaplan emphasized that he believed that the Federal Reserve is cautious to avoid a scenario where the monetary tightening becomes overly restrictive.
  • US Richmond Fed Manufacturing Index recorded a significant decline of 11 points in December, exceeding the market’s expectation of a 7-point drop. This comes after a 5-point decrease in November.
  • US Housing Price Index (MoM) contracted to 0.3% from 0.7% prior, falling short of 0.5% expectations in October.

Technical Analysis: Australian Dollar treads water below 0.6850 major level

The Australian Dollar hovers around 0.6840 on Friday. The prevailing bullish sentiment suggests a potential for the AUD/USD pair to surpass again the major resistance level at 0.6850 following the psychological level of 0.6900. On the downside, the AUD/USD pair could find the key support at the seven-day Exponential Moving Average (EMA) at 0.6810 before the psychological support at 0.6800. A breach below this crucial support zone could potentially lead the pair to navigate the 23.6% Fibonacci retracement level at 0.6725.

AUD/USD: Daily Chart

Australian Dollar price this week

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

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.37% -0.16% -0.35% -0.63% -0.71% -0.82% -1.53%
EUR 0.47%   0.24% 0.16% -0.19% -0.31% -0.34% -1.06%
GBP 0.29% -0.29%   0.08% -0.45% -0.56% -0.47% -1.48%
CAD 0.35% -0.35% 0.13%   -0.54% -0.36% -0.30% -1.32%
AUD 0.63% 0.19% 0.45% 0.29%   -0.11% -0.15% -1.07%
JPY 0.71% 0.36% 0.36% 0.65% 0.11%   0.10% -0.95%
NZD 0.81% 0.38% 0.67% 0.46% 0.15% 0.04%   -0.65%
CHF 1.69% 1.03% 1.17% 1.31% 1.12% 0.95% 0.73%  

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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