Australian Dollar maintains position near a psychological mark, awaits US CPI


  • Australian Dollar holds ground amid improved risk appetite on Tuesday.
  • Australia’s Westpac Consumer Confidence fell by 2.4% in April, against the previous decline of 1.8%.
  • US Dollar receives downward pressure as volatility prevails ahead of US CPI.

The Australian Dollar (AUD) continues to hold onto its gains registered in the previous session despite the subdued Westpac Consumer Confidence released on Tuesday. The decline in the US Dollar (USD) provided support for the AUD/USD pair, which could be attributed to the improved risk appetite.

The Australian Dollar strengthens amid a higher domestic equity market. The ASX 200 Index positions for gains as investor attention remains fixed on the Reserve Bank of Australia’s (RBA) interest rate decisions. Investors are growing more doubtful about the need for the RBA to cut interest rates in 2024, especially after positive US data bolstered expectations that the Federal Reserve (Fed) may prolong its higher interest rate stance.

The US Dollar Index (DXY) encounters hurdles as the Federal Reserve carefully evaluates incoming data, prompting fluctuations in the market. Traders eagerly anticipate the release of the US Consumer Price Index data scheduled for Wednesday. They will also focus on Australian Consumer Inflation Expectations and Chinese consumer prices slated for Thursday.

Daily Digest Market Movers: Australian Dollar holds position amid weaker Consumer Confidence

  • Australia’s Westpac Consumer Confidence declined by 2.4% in April, against the previous fall of 1.8%.
  • Australian data showed on Friday that Trade Surplus (MoM) narrowed to 7,280 million in March, falling short of the expected 10,400 million and February’s reading of 10,058 million.
  • Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari emphasized the importance of the central bank's commitment to combatting inflation. Kashkari stressed that despite the current inflation rate hovering around 3%, the Fed must strive to bring it back down to the target level of 2%.
  • According to the CME FedWatch Tool, the likelihood of a 25-basis point rate cut by the Fed in June has reduced to 51.1%.
  • US headline CPI is expected to experience an acceleration in March, whereas the core measure is expected to show a cooling down.
  • US Nonfarm Payrolls (NFP) reported a significant increase of 303,000 jobs in March, surpassing expectations of 200,000 and the previous reading of 270,000.
  • US Average Hourly Earnings rose by 0.3% month-over-month in March, meeting expectations. The previous reading was 0.2%. There was an increase of 4.1% on an annual basis, aligning with the market consensus but slightly lower than 4.3% prior.

Technical Analysis: Australian Dollar hovers above the psychological support of 0.6600

The Australian Dollar trades around 0.6610 on Tuesday. The AUD/USD pair may experience an upward movement, as it has recently tested the range around 0.6620 and 0.6630 multiple times throughout March. Moreover, the pair surpassed the nine-day Exponential Moving Average (EMA) in the previous week and has found support on it since then. The key resistance region is observed around the major level of 0.6650, followed by March’s high of 0.6667. On the downside, immediate support is identified around the psychological level of 0.6600, followed by the nine-day EMA at 0.6570 and the major support level of 0.6550.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.03% -0.02% 0.02% -0.03% 0.03% -0.11% -0.05%
EUR -0.03%   -0.04% -0.01% -0.06% 0.00% -0.14% -0.08%
GBP 0.02% 0.05%   0.04% -0.01% 0.05% -0.08% -0.03%
CAD -0.02% 0.02% -0.05%   -0.04% 0.00% -0.11% -0.09%
AUD 0.00% 0.04% -0.01% 0.02%   0.04% -0.10% -0.05%
JPY -0.03% 0.02% -0.04% -0.01% -0.04%   -0.12% -0.09%
NZD 0.09% 0.12% 0.07% 0.10% 0.05% 0.12%   0.02%
CHF 0.05% 0.09% 0.05% 0.09% 0.03% 0.10% -0.04%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

 

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