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10/09/24
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AUD Declines vs USD Amidst Consumer Confidence Drop and RBA Stance
The Australian Dollar (AUD) is experiencing a decline against the US Dollar (USD) following the latest Westpac Consumer Confidence report, which indicated a disappointing 0.5% decrease month-on-month for September. This contrasts sharply with the positive trend seen in August, where consumer confidence increased by 2.8%. As the AUD/USD pair records its third consecutive day of losses, traders are also bracing for upcoming China Trade Balance data, given the close economic ties between Australia and China, which could significantly influence Australian market dynamics.
Despite the recent drop in consumer confidence, the potential for further depreciation of the AUD may be capped by the Reserve Bank of Australia’s (RBA) hawkish stance. RBA Governor Michele Bullock has indicated that it’s premature to consider interest rate cuts, suggesting the RBA does not foresee a reduction in rates in the immediate future. Market expectations regarding the Federal Reserve’s next moves show a 71% anticipation of at least a 25 basis point cut, but the probability of a deeper 50 basis point cut has slightly decreased, standing at 29%.
In context to broader economic indicators, China’s Consumer Price Index (CPI) reported a year-on-year increase of 0.6% for August, slightly below the market consensus. Meanwhile, in the US, the Bureau of Labor Statistics revealed that Nonfarm Payrolls added 142,000 jobs in August, which fell short of forecasts but marked an improvement from July’s numbers. The unemployment rate also decreased to 4.2%, further supporting the USD’s strength.
Currently trading around 0.6650, the AUD/USD pair continues to follow a bearish trend, suggesting further potential declines. Analysts identify a target around 0.6630, the lower boundary of the descending channel. A breakout below this level could intensify bearish momentum, leading the pair towards the support region at 0.6575. On the resistance front, a breakthrough above the recent resistance level of 0.6703 could indicate a shift in momentum, with potential for the pair to test higher levels, particularly the upper boundary of the descending channel at 0.6750 or even approach the seven-month high of 0.6798 achieved in mid-July.
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