10/09/24

25

The AUD/USD currency pair is showing signs of recovery after hitting a three-week low earlier this week, managing to hold onto support near the 100-day Simple Moving Average (SMA) at approximately 0.6645. The modest rebound comes on the heels of mixed Chinese trade data, which indicated a widening trade surplus, but concerns linger about domestic demand due to disappointing import figures. These factors, combined with a slight uptick in the US dollar, suggest that any significant appreciation for the pair may be limited as traders await important economic data from the U.S.

Investor sentiment has shifted in response to the latest mixed employment figures from the U.S., causing a reevaluation of expectations for Federal Reserve policy changes. According to recent assessments, there is a 71% probability of a 25 basis-point rate cut at the upcoming Federal Open Market Committee meeting, while the likelihood of a 50 basis-point cut stands at only 29%. This has propelled the USD Index closer to its recent monthly peak, which could act as a headwind for the AUD/USD pair. As a result, many traders seem inclined to hold off on new positions until the upcoming US inflation figures provide clearer direction.

The Consumer Price Index (CPI) report is scheduled for release soon, followed by the Producer Price Index (PPI) the next day. If inflation data comes in lower than expected, it could fuel speculation for a more aggressive Fed rate cut, leading to renewed selling of the USD. Conversely, if inflation remains strong, the market reaction may be tempered as the Fed is anticipated to enter its rate-cutting cycle soon. This outlook, together with the Reserve Bank of Australia’s relatively hawkish stance, implies that the recent decline in the AUD/USD pair may be stabilizing.

Technically, the 100-day SMA is a critical level to consider, overlapping with the 38.2% Fibonacci retracement of a significant recovery since August’s low. If the AUD/USD permanently dips below this level, it may trigger significant selling pressure, potentially driving the price toward lower support levels around sub-0.6600. Conversely, resistance at the 0.6700 level is expected to be a challenge, with a breakthrough potentially opening the door for a rise toward the 0.6765 level and beyond.