- AUD/USD recovers intraday losses following the release of China trade balance data.
- China's trade balance rose to RMB649.34 billion in August from RMB601.9 billion the previous month.
- The US dollar received support after recent employment data reduced the likelihood of an aggressive Fed rate cut in September.
The AUD/USD pair rose after China’s trade balance data was released on Tuesday, but the Australian Dollar (AUD) struggled against the US Dollar (USD) due to a weak Westpac consumer confidence index.
Additionally, the AUD/USD pair faced difficulties as recent US labor market reports increased uncertainty over the likelihood of the Federal Reserve (Fed) cutting interest rates aggressively at its September meeting, providing support to the US Dollar.
China reported a trade surplus of 649.34 billion yuan in August, up from 601.9 billion yuan in the previous report. Meanwhile, China's exports (yuan) increased 8.4% year-on-year, following a 6.5% increase in the previous report.
Australia's Westpac Consumer Confidence Index fell 0.5% month-on-month in September, reversing a 2.8% increase in August. Traders are awaiting China's trade balance data, which is due to be released later in the day. Given Australia's close trading relationship with China, any changes in the Chinese economy could have a significant impact on the Australian market.
Daily Digest Market Trends: Australian dollar continues to fall as risk aversion rises
- According to the CME FedWatch tool, the market fully expects the Federal Reserve to cut interest rates by at least 25 basis points (bps) at its September meeting, with the likelihood of a 50 bps cut declining slightly to 29.0% from 30.0% a week ago.
- China's consumer price index (CPI) rose 0.6% year-on-year in August, up from 0.5% in July but below the market consensus forecast of 0.7%. On a monthly basis, CPI inflation rose 0.4% in August, down from 0.5% in July and worse than the 0.5% forecast.
- RBC Capital Markets now expects the Reserve Bank of Australia to cut interest rates at its February 2025 meeting, sooner than its previous forecast of May 2025. Although Australia's inflation rate remains above the RBA's target, slowing economic growth is not considered a sufficient reason for a rate cut this year.
- The U.S. Bureau of Labor Statistics (BLS) announced that nonfarm payrolls (NFP) rose by 142,000 in August, below the expected 160,000 but an improvement from July's downwardly revised figure of 89,000. Meanwhile, the unemployment rate fell to 4.2% from 4.3% in the previous month, as expected.
- Federal Reserve Bank of Chicago President Austin Goolsby said on Friday that Fed officials are starting to align with the market-wide view that a rate adjustment by the US central bank is imminent, according to CNBC. FX Street's FedTracker, which uses a custom AI model to rate Fed officials' comments on a scale of 0 to 10 from dovish to hawkish, rated Goolsby's comments as dovish, giving them a score of 3.2.
Technical reasons why: AUD is testing 0.6650 near the lower boundary of the descending channel
On Tuesday, the AUD/USD pair is trading near 0.6650. Daily chart analysis shows that the pair is declining along the lower boundary of the descending channel, indicating a strengthening bearish bias. Moreover, the 14-day Relative Strength Index (RSI) has fallen below the 50 level, confirming the continuation of the bearish trend for the AUD/USD pair.
On the downside, the AUD/USD pair is targeting the lower limit of the descending channel around the 0.6630 level, a break below this level would strengthen the bearish bias and the pair may move through the area around the throwback support at 0.6575.
In terms of resistance, the AUD/USD pair is likely to find a barrier near the 9-day exponential moving average (EMA) at the 0.6703 level. A break above this level could weaken the bearish bias and allow the AUD/USD pair to test the upper limit of the descending channel near the 0.6750 level and then reach the seven-month high of 0.6798 recorded on July 11th.
AUD/USD: Daily Chart
Today's price of the Australian dollar
The table below shows the percentage change of the Australian Dollar (AUD) against the major listed currencies today: The Australian Dollar was strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | Australian Dollar | NZD | Swiss Franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.06% | -0.03% | 0.04% | -0.11% | -0.11% | -0.15% | |
| EUR | 0.01% | -0.04% | 0.00% | 0.04% | -0.11% | -0.14% | -0.14% | |
| GBP | 0.06% | 0.04% | 0.02% | 0.05% | -0.06% | -0.10% | -0.08% | |
| JPY | 0.03% | 0.00% | -0.02% | 0.04% | -0.10% | -0.13% | -0.14% | |
| CAD | -0.04% | -0.04% | -0.05% | -0.04% | -0.16% | -0.15% | -0.18% | |
| Australian Dollar | 0.11% | 0.11% | 0.06% | 0.10% | 0.16% | -0.01% | -0.03% | |
| NZD | 0.11% | 0.14% | 0.10% | 0.13% | 0.15% | 0.01% | -0.01% | |
| Swiss Franc | 0.15% | 0.14% | 0.08% | 0.14% | 0.18% | 0.03% | 0.01% |
The heat map displays the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select the Australian Dollar from the left column and move it along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
RBA FAQ
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy in Australia. Decisions are made at 11 board meetings per year and ad-hoc emergency meetings as necessary. The RBA's primary mission is to maintain price stability (i.e. inflation between 2-3%), but also to “contribute to monetary stability, full employment and the economic prosperity and well-being of the Australian people”. Its main tool for achieving this goal is to raise or lower interest rates. Relatively higher interest rates will strengthen the Australian dollar (AUD) and vice versa. The RBA's other tools include quantitative easing and tightening.
Inflation has always been considered a negative factor for currencies as it generally reduces the value of money, but the opposite has become true in modern times due to the relaxation of cross-border capital controls. Moderately high inflation tends to cause central banks to raise interest rates, which has the effect of increasing capital inflows from investors around the world looking for a favorable place to park their funds. This increases the demand for the local currency, which in Australia's case is the Australian dollar.
Macroeconomic data measures the health of the economy and can affect the value of the currency. Investors prefer to put their capital in a safe and growing economy rather than an unstable and contracting one. Increased capital inflows increase aggregate demand and the value of the domestic currency. Common indicators such as GDP, manufacturing and services PMI, employment, and consumer sentiment surveys can affect the AUD. If the economy is doing well, the Reserve Bank of Australia may raise interest rates, supporting the AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates fails to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) to buy assets (usually government or corporate bonds) from financial institutions, providing them with much-needed liquidity. QE typically weakens the AUD.
Quantitative tightening (QT) is the opposite of QE. It is implemented after QE when the economic recovery is underway and inflation starts to rise. In QE, the Reserve Bank of Australia (RBA) provides liquidity by purchasing government and corporate bonds from financial institutions, but in QT, the RBA stops purchasing further assets and stops reinvesting principal on maturing bonds it already holds. This will be positive (or bullish) for the Australian dollar.
