30/08/24

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The Australian Dollar (AUD) has maintained its steadiness against the US Dollar (USD) despite July’s Retail Sales report indicating no growth. The data revealed that retail sales stagnated month-on-month, disappointing expectations of a 0.3% increase following a prior 0.5% rise. In contrast, stronger-than-anticipated US Gross Domestic Product (GDP) numbers for the second quarter exerted downward pressure on the AUD/USD pair.

The outlook for the AUD may improve due to a more robust-than-expected Monthly Consumer Price Index (CPI) for July. This uptick in inflation could nudge the Reserve Bank of Australia (RBA) towards a more hawkish monetary policy stance, especially as recent RBA meeting minutes suggested that a rate cut is unlikely in the near term.

On the other hand, the US Dollar is experiencing support from positive economic indicators, although dovish statements from Federal Reserve officials may temper its upward momentum. Notably, comments from Atlanta Fed President Raphael Bostic indicate a potential consideration for rate cuts as inflation eases and unemployment rises more significantly than forecasted.

Market expectations are leaning towards at least a 25 basis point rate cut by the Federal Reserve in September, as indicated by available tools tracking interest rate futures. Investors are particularly focused on the release of the US Personal Consumption Expenditure (PCE) Price Index, which could provide insights into the future trajectory of US interest rates.

Economically, Australia’s Private Capital Expenditure saw a surprising decline of 2.2% in the last quarter, reversing previously recorded growth and signaling a retreat in business investment. Additionally, the CPI figures for July showed a year-on-year increase of 3.5%, slightly above consensus estimates, although lower than the previous month.

The AUD/USD pair currently hovers around 0.6790. Technical analysis reveals it is testing the lower boundary of an upward trending channel, maintaining an overall bullish outlook. Resistance is noted near the seven-month high of 0.6798, while support may emerge around the nine-day Exponential Moving Average at 0.6761. A drop below this level might challenge the bullish momentum, opening potential declines towards 0.6575 and further down to 0.6470.