On Friday, the Australian dollar (AUD) experienced some gains against the US dollar (USD), with the AUD/USD pair rising after cautious remarks from Reserve Bank of Australia (RBA) Governor Michelle Bullock.
Bullock remarked that services inflation remains notably persistent. She noted that inflation in the second quarter was marginally higher than anticipated, though still trending positively. However, she emphasized the necessity for caution due to the variability in monthly CPI data, mentioning that while the labor market remains somewhat tight, it might be nearing a more balanced state.
In October, Australian consumer inflation expectations increased to 4.8% from 4.7%, reaching the highest level since June. There are growing worries that inflation in Australia during the third quarter may exceed forecasts, reinforcing the cautious attitude of the Reserve Bank. Traders are anticipating that the RBA will maintain interest rates, especially after its decision to keep the Official Cash Rate (OCR) steady at 3.6% in September.
Australian dollar dips despite weaker US dollar
- The US Dollar Index (DXY), which gauges the USD against six major currencies, has suffered losses after a four-day upswing, trading around 99.30 as of writing. The U.S. Senate remains gridlocked over legislation to address a potential government shutdown.
- The minutes from the September Federal Open Market Committee (FOMC) meeting indicated that many policymakers are leaning towards additional rate cuts by the year’s end. A significant number supported a cut in September, suggesting more might follow. Yet, there are concerns about inflation that some members voiced.
- The CME FedWatch tool indicates that the market sees a 95% chance of the Fed lowering rates in October, with an 82% likelihood for another cut in December.
- Federal Reserve Board Chairman Stephen Milan expressed on Tuesday that he believes inflation stems largely from “population growth.” He also noted that monetary policy should be eased before lowering the neutral interest rate.
- Minneapolis Fed President Neel Kashkari, in a more cautious tone compared to some of his colleagues, mentioned it’s still unclear if tariff-induced inflation will remain “sticky.” He remains optimistic about job creation in the U.S. after a recent dip.
- Kansas City Fed President Jeffrey Schmidt made hawkish comments on Monday, emphasizing that the Fed must uphold its credibility regarding inflation and asserting that inflation levels are too high. He believes monetary policy has been suitably adjusted.
- China’s Ministry of Commerce revealed on Thursday plans to tighten regulations on rare earth exports starting December 1. Foreign entities will need to secure a dual-use export license for these materials.
- As expected, private house approvals in Australia dropped by 2.6% month-on-month in August to 9,027, reversing the previous month’s 1.3% increase. In contrast, seasonally adjusted building permits fell by 6% from the prior month to 14,744 units, following a previous 10% decline, marking a second consecutive monthly drop.
- The University of Melbourne reported a 3.5% decrease in Australia’s Westpac consumer confidence in October, down to 92.1—the steepest drop since April. In September, ANZ job advertisements fell by 3.3%, a noticeable decline compared to the previous month’s slight drop of 0.3%.
- The TD-MI inflation gauge climbed by 0.4% month-on-month in September, recovering from a 0.3% decline in August, while the annual inflation rate increased to 3% from the previous quarter’s rise of 2.8%.
Australian dollar approaches 9-day EMA in upward trend
The AUD/USD pair was trading around 0.6570 on Friday. Technical analyses suggest that the pair is bouncing back toward the ascending channel, hinting at a return of bullish sentiment. Despite this, the 14-day Relative Strength Index (RSI) remains under 50, indicating a continued bearish sentiment.
On the downside, the AUD/USD is testing immediate support at the 50-day exponential moving average (EMA) at 0.6563. If this level is broken, it could weaken price momentum in the medium term and keep the currency near the four-month low of 0.6414, noted on August 21, followed by a five-month low of 0.6372.
A return to the ascending channel would restore the bullish trend and drive the AUD/USD towards the 9-day EMA at 0.6582. A breakthrough above this point could enhance short-term price momentum, aiming for territory around 0.6707, which is the 12-month high achieved on September 17, and then the channel’s upper boundary at 0.6810.
AUD/USD: daily chart
The Australian dollar price today shows various dynamics against major currencies, revealing that it was particularly weak against the Japanese yen.
