The AUD/USD has struggled for the third consecutive day, hovering around 0.6550 during Friday’s Asian market. There hasn’t been much change since the release of the NBS Manufacturing Purchasing Managers’ Index (PMI) from China. Since Australia has strong trade ties with China, any shifts in China’s economy can significantly influence the Australian Dollar.
In October, China’s NBS Manufacturing PMI dropped sharply to 49.0 from 49.8 in September, falling below the anticipated 49.6. On a different note, the NBS Non-Manufacturing PMI saw a slight, unexpected rise to 50.1, surpassing both the previous reading and the consensus of 50.0.
The AUD/USD pair has faced headwinds as the Australian dollar remained weak. Market sentiment is muted; there were no upbeat developments following the recent meeting between President Trump and China’s President Xi Jinping. Trump revealed plans to cut tariffs on China from 57% to 47% and noted that the rare earth export spat was settled. Still, he admitted that not all concerns were addressed in their discussions.
USD holds steady as Fed rate cut prospects wane
- The US Dollar Index (DXY), which tracks the dollar against six major currencies, has leveled off around 99.50. Recently, comments from Jerome Powell, the Federal Reserve’s chairman, lowered expectations for additional rate cuts.
- On Wednesday, the Federal Reserve opted to reduce interest rates by 25 basis points, bringing the benchmark rate down to a range of 3.75% to 4.0% with a 10-2 vote. This decision wasn’t unanimous, as Director Stephen Milan backed a more substantial 50 basis point cut, while Kansas City Fed President Jeffrey Schmidt preferred to maintain the current rates.
- Powell noted that the Federal Reserve is trying to manage its dual objectives of controlling inflation and supporting employment amid an ongoing U.S. government shutdown and limited data availability. He cautioned that further interest rate cuts in December are uncertain, as the future outlook remains unclear.
- Strengthening the U.S. dollar was also tied to the Fed’s confirmation of continued tapering of its quantitative easing (QE) policy, converting mortgage-backed securities into long-term government bonds by December 1.
- The RBA’s trimmed average CPI showed a 1.0% increase quarterly and a 3.0% rise annually. Analysts had forecasted increases of 0.8% quarter-over-quarter and 2.7% year-on-year for the September quarter. Interestingly, the monthly CPI rose 3.5% year-on-year in August, outpacing the prior reading of 3.0% and exceeding expectations of 3.1%.
- Australia’s inflation data from Q3 and August had been better than expected, which diminished hopes for a near-term rate cut from the RBA. RBA Governor Bullock commented on the labor market remaining somewhat tight, despite an unexpected rise in unemployment.
AUD/USD remains near 9-day EMA support at 0.6550
The AUD/USD was trading at approximately 0.6550 on Friday. An analysis of the daily chart points to a neutral stance, as the pair fluctuates within a rectangular pattern. Currently, it sits above the 9-day exponential moving average (EMA), indicating a healthy short-term price momentum.
To the upside, the initial resistance level is at the key mark of 0.6600, followed by an upper boundary of around 0.6630. Surpassing this rectangular pattern could ignite a bullish sentiment, pushing the AUD/USD toward the 12-month peak of 0.6707 recorded on September 17.
Conversely, the primary support rests at the 9-day EMA at 0.6544. A drop below this threshold would weaken the short-term and medium-term price momentum, potentially leading the AUD/USD to the lower end of the rectangle around 0.6450 and even down to a four-month low of approximately 0.6414.
