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11/09/24
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Stability of AUD/USD Amid Hawkish RBA Outlook and US Labor Market Concerns
The AUD/USD exchange rate has remained stable in light of recent comments from the Reserve Bank of Australia’s (RBA) Assistant Governor for Economics. The prevailing high interest rates are currently dampening demand, which is anticipated to lead to a mild economic contraction in the near future. In the context of these remarks, the Australian Dollar (AUD) has shown resilience, especially as RBA Governor Michele Bullock’s recent hawkish stance emphasized the need to avoid premature rate cuts given the persistently high inflation levels.
The strength of the US Dollar has put additional pressure on the AUD/USD pair, particularly following a United States labor market report that raised questions about the Federal Reserve’s aggressive interest rate-cut plans for the upcoming September meeting. Market analysts are closely monitoring these developments as the likelihood of a 25 basis point cut is fully priced in, while a more substantial 50 basis point cut has seen its probability decline.
In economic indicators, Australia’s Westpac Consumer Confidence saw a decline of 0.5% in September, reversing the previous month’s gains. Meanwhile, China’s trade data revealed a growing trade surplus, alongside a notable increase in exports compared to last year. This mixed economic landscape highlights the broader complexities both Australia and China face going forward.
Elsewhere, predictions from RBC Capital Markets suggest that the RBA may initiate a rate cut sooner than previously expected, moving from May 2025 to February 2025. This adjustment reflects a recognition that, despite ongoing inflation challenges, current economic growth trajectories may necessitate easier monetary policy earlier than previously thought.
Technical analysis indicates that the AUD/USD is hovering around the 0.6650 level, situated within a descending channel which portrays a bearish outlook. Should the pair breach the lower boundary near 0.6620, further declines towards 0.6575 may ensue. Conversely, the rally could be hindered by resistance levels identified around the nine-day Exponential Moving Average at 0.6693, with a breakthrough above the channel resistance bringing potential for gains back toward the seven-month high of 0.6798, observed in mid-July.
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