- The Australian dollar is bouncing back, even with lackluster economic data from China.
- Retail sales in China saw a 3.7% increase year-on-year in July, which is below the forecasts of 4.6% and 4.8% from June.
- After a nearly 0.5% gain in the previous session, the US dollar is experiencing a slight decline.
The Australian dollar (AUD) is showing resilience against the US dollar (USD) on Friday, despite some disappointing economic indicators from China, which is Australia’s main trading partner. The AUD/USD pair fell over 0.5% in the previous session as the US dollar strengthened, buoyed by promising US economic news.
In China, retail sales increased by 3.7% year-on-year in July, missing the June forecasts (4.6% and 4.8%). Industrial production also grew, but only by 5.7%, which was slightly off from the expected 5.9% and significantly lower than the previous 6.8%.
Nevertheless, the downside for the AUD/USD pair might be somewhat limited. There’s a noticeable struggle for the US dollar as expectations rise that the Federal Reserve will lower interest rates in September. Retail sales data for the US and Michigan’s preliminary consumer sentiment index are anticipated later in the day.
Australian dollar rises as US dollar dips following retail sales data
- The US Dollar Index (DXY), which reflects the dollar’s strength against six major currencies, is down to around 98.10.
- The US Producer Price Index (PPI) rose by 3.3% year-on-year in July, stronger than the expected 2.5%, up from earlier in the year when it was 2.4%.
- Initial unemployment claims in the US for the week ending August 9th decreased to 224K, which is below market expectations of 228K.
- CME’s FedWatch tool indicates a nearly 92% likelihood of a 25 basis point interest rate cut in the upcoming September meeting.
- US Treasury Secretary Scott Bescent mentioned in an interview that short-term interest rates should ideally be between 1.5-1.75% lower than the current benchmark rate.
- President Donald Trump has suggested that the Fed’s rate should hover around 1%, arguing for even lower rates, stating they should be 3 or 4 points lower based on a simple calculation.
- Chicago Federal President Austan Goolsbee emphasized the necessity of the Fed operating independently from political influences to avoid reigniting inflation.
- White House spokesperson Karoline Leavitt expressed that Trump may consider legal action against Federal Reserve Chairman Jerome Powell regarding renovations at the Fed headquarters, which brings up concerns about the Fed’s independence.
- Bescent also mentioned that US and China trade officials plan to meet within the next few months to discuss their economic relationship.
- In Australia, employment changes showed an increase of 24.5K jobs in July, which is slightly below the consensus forecast of 25K.
- The unemployment rate in Australia fell from 4.3% in June to 4.2% as anticipated.
- The Reserve Bank of Australia (RBA) is widely expected to implement a 25 basis point interest rate cut, adjusting its official cash rate from 3.85% to 3.6% in August.
- RBA Governor Michele Bullock indicated that future cash rate adjustments might be necessary for price stability but refrained from committing to specific changes, emphasizing a cautious, meeting-by-meeting approach.
- The RBA’s monetary policy statement reiterated a commitment to maintaining price stability and full employment amidst an uncertain outlook.
Australian dollar heads towards a resistance level around 0.6500
On Friday, the AUD/USD pair is trading at approximately 0.6490. A review of daily technical charts suggests a shift in momentum from bullish to a more bearish stance, as the pair has dipped below its rising channel. It also shows tepid short-term momentum below the nine-day exponential moving average (EMA), while the 14-day relative strength index (RSI) is under the 50 mark, hinting at bearish market sentiment.
In the near term, both short- and medium-term price momentum may be subdued, indicating that the AUD/USD pair could experience challenges in retracing from the two-month low of 0.6419 recorded on August 1, and the three-month low of 0.6372 logged on June 23.
The immediate resistance for the AUD/USD pair is at the 50-day EMA around 0.6500, followed by the nine-day EMA at 0.6508. A rebound towards the rising channel suggests the possibility of a bearish trap followed by a bullish recovery.
AUD/USD: Daily Charts
The table below outlines the current rates for the Australian dollar (AUD) against several major currencies. Notably, the AUD is showing strength in comparison to the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | -0.11% | -0.52% | -0.09% | -0.15% | -0.09% | -0.10% | |
| EUR | 0.10% | -0.01% | -0.31% | 0.02% | -0.07% | 0.00% | 0.00% | |
| GBP | 0.11% | 0.01% | -0.30% | 0.03% | -0.06% | 0.01% | 0.02% | |
| JPY | 0.52% | 0.31% | 0.30% | 0.34% | 0.27% | 0.38% | 0.30% | |
| CAD | 0.09% | -0.02% | -0.03% | -0.34% | -0.01% | -0.01% | -0.01% | |
| AUD | 0.15% | 0.07% | 0.06% | -0.27% | 0.01% | 0.00% | 0.08% | |
| NZD | 0.09% | -0.00% | -0.01% | -0.38% | 0.01% | -0.00% | 0.00% | |
| CHF | 0.10% | -0.00% | -0.02% | -0.30% | 0.01% | -0.08% | -0.00% |
This heatmap illustrates the rate of change among major currencies. The currency in the left column serves as the base, while the estimated currency is in the top row. For example, to see how the Australian dollar compares to the US dollar, refer to the intersection in the table.
