20/11/24

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The Australian Dollar (AUD) has shown signs of strength, bolstered by insights from the Reserve Bank of Australia’s (RBA) recent meeting, which highlighted the necessity of maintaining a restrictive monetary policy. Meanwhile, the People’s Bank of China (PBoC) has decided to keep its interest rate steady at 3.1% for November, a move that may influence market dynamics moving forward.

In the context of market stability, the AUD is seeking to extend its gains for a fourth consecutive day. However, pressures remain as the US Dollar (USD) gains traction from safe-haven flows due to the heightened geopolitical tensions resulting from the ongoing Russia-Ukraine conflict. Reports have indicated significant developments on this front, with Ukraine employing US-supplied missiles to engage Russian targets, leading to increased concerns among investors. Although these tensions may prompt safe-haven buying of the USD, reassurances from Russian officials about avoiding extreme escalation have provided some comfort to the markets.

The RBA’s recent minutes reflect the central bank’s cautious stance regarding inflation. Although board members acknowledged there is no urgent requirement to adjust the cash rate, they have not excluded the possibility of future changes depending on economic conditions. This suggests a vigilant approach to any potential shifts in the economic landscape.

In contrast, the US Dollar stabilized after several days of losses, following disappointing economic indicators. Investors are now closely monitoring the expected pro-inflationary policies of the incoming administration, which could include tax reforms and tariffs likely to exert upward pressure on inflation. This anticipation may affect the Federal Reserve’s decision-making regarding interest rates.

On the broader economic front, encouraging figures emerged from the US retail sector, which saw a notable increase in sales, while China reported moderate growth in retail sales and industrial production. This economic interdependence between China and Australia further emphasizes the potential impact of China’s performance on Australia’s markets.

Technical analysis indicates that the AUD remains in a downward trend within a descending channel, with support levels around 0.6380. Movements above the nine-day exponential moving average at 0.6525 may signal a temporary shift, potentially allowing for a rally toward higher resistance levels if the upward momentum can be maintained.