The Australian Dollar Rises After CPI Release

• The Australian dollar gained ground following the release of the monthly consumer price index (CPI) on Wednesday.
• The CPI in Australia increased by 3.0% year-on-year in August, up from a previous 2.8% in July.
• Federal Reserve Chairman Jerome Powell indicated that further rate cuts could be on the table if the Federal Open Market Committee (FOMC) sees the need for more support.

On Wednesday, the Australian Dollar (AUD) benefited from positive news as the CPI for August showed a 3.0% rise compared to last year, following July’s increase of 2.8%.

Meanwhile, Australia’s preliminary S&P Global Composite PMI fell to 52.1 in September from 55.5, marking the lowest level in three months. This slowdown in both manufacturing and services comes amid a substantial decline in new business orders and product orders. Specifically, the S&P Global Services PMI decreased from 55.8 in August to 52 in September, while the manufacturing PMI dropped from 53.0 to 51.6.

In other news, the White House has announced that Australian Prime Minister Anthony Albanese will meet President Donald Trump in Washington, DC, on October 20. Their discussions will focus on the Orcas Nuclear Submarine Agreement.

Reserve Bank of Australia (RBA) Governor Michelle Bullock informed Congress that there is a slight easing in the labor market, with rising unemployment. She suggested that recent interest rate cuts should help stimulate consumer spending, though the RBA must be cautious about the evolving economic situation and be prepared to act as needed.

Australian Dollar Progresses Amid Stable US Dollar

• The US Dollar Index (DXY), evaluating the greenback against six major currencies, stood at around 97.30. Despite this, the dollar faced hurdles after the release of the US S&P Global PMI figures for September.
• The US S&P Global Composite PMI fell from 54.6 to 53.6, indicating that the private sector is struggling to gain strength. The manufacturing PMI eased from 53 to 52, leading to reduced momentum, while the services PMI slipped from 54.5 to 53.9.
• Chairman Powell expressed concerns regarding weak labor markets and persistent inflation, suggesting that this may warrant rate cuts during the last meeting. He maintained that he is satisfied with the current policy but remains open to further reductions if needed.
• Bank of Cleveland President Beth Hammack warned that inflationary pressures might persist for a while, highlighting the challenges the Fed faces in balancing inflation control and labor market support.
• Richmond Federal President Thomas Birkin pointed out that tariff policies often drive up consumer prices and that unclear trade policies pose a greater concern for businesses than high-interest rates.
• The White House revealed that American firms will oversee TikTok’s algorithms, with Americans taking on six of the seven board positions for US operations. White House spokesperson Karoline Leavitt indicated that a deal could be finalized soon.
• Currently, the market assigns only a 20% chance of a rate cut in September from the RBA, with a 70% probability for November, as inflation remains a concern for policymakers.

Australian Dollar Surpasses 0.6600, Approaches 9-Day EMA

AUD/USD is trading around 0.6610 on Wednesday. Technical analysis indicates that the pair is positioned slightly below a rising channel pattern, hinting at a potential decline in bullish momentum. However, the 14-day relative strength index (RSI) is just above the 50 mark, suggesting some ongoing bullish sentiment.

The AUD/USD is currently testing a critical barrier at the 9-day exponential moving average (EMA) of 0.6611, with the upper channel limit close to 0.6640. A rebound that supports short-term price movements could bring the pair closer to the 11-month high of 0.6707 reached on September 17, with a potential cap at around 0.6730.

On the downside, the AUD/USD pair might find initial support at 0.6600, which aligns with the 50-day EMA at 0.6551. If it falls below this support, the medium-term price momentum could weaken, potentially pushing it to a three-month low of 0.6414 from August 21.

AUD/USD: Daily Charts