CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

• AUD/USD trends lower after US inflation data prompts rethink on Federal Reserve's easing timeline.
• February’s CPI report at 3.2% YoY fuels US Dollar strength, overshadowing Australian business sentiment.
• Traders recalibrate rate cut expectations, with focus shifting to upcoming US retail sales data for further cues.

The Australian Dollar printed back-to-back negative days during the week against the US Dollar, courtesy of a warm inflation report in the United States (US) that justified the Federal Reserve’s stance to be patient in cutting borrowing costs. On Tuesday, the AUD/USD was down 0.11%, and as the Wednesday Asian session commences, it trades virtually unchanged at 0.6606.

Aussie Dollar on the defensive as US CPI surpasses forecasts, Fed rate cut estimates adjust

The US Bureau of Labor Statistics (BLS) revealed that February’s inflation was slightly higher than expected. The Consumer Price Index (CPI) in February exceeded estimates of 3.1% YoY as inflation printed 3.2% and above January’s 3.1%. Underlying inflation, as measured by the core CPI, stood at 3.8% YoY, down from 3.9%, but missed the consensus of 3.7%.

After the data, the AUD/USD extended its losses as US Treasury bond yields rose, underpinning the Greenback. The US Dollar Index (DXY), a gauge of the buck’s value against a basket of peers, gained 0.18%, up at 102.92, with buyers shy of reclaiming the 103.00 mark.

Following the US data release, the CME FedWatch Tool shows traders increased their bets for a 25-basis-point rate cut in June, down from 72% a day ago to 68%.

The Aussie’s economic docket on Tuesday featured NAB Business Conditions for February. Conditions improved from 6.0 to 10.0, while Business Confidence deteriorated from 1.0 to 0.0.

Ahead of the week, the Australian economic docket is empty, while in the US, it is not. US Retail Sales for February are expected to rise by 0.8% MoM, and the control group (used to calculate the Gross Domestic Product) at 0.4% MoM

AUD/USD Price Analysis: Technical outlook

The AUD/USD registered two straight sessions with lower closes, suggesting that sellers gathered momentum, but the Relative Strength Index (RSI) indicator shows another story. As the pair extended its losses, the RSI is flat, while the 100-day moving average (DMA) crossed four days ago above the 200-DMA.

That said, the DMAs are in perfectly bullish order, which could signal that buyers are in charge. Nevertheless, they must reclaim the March 12 high at 0.6638 so they can challenge the March 8 cycle high at 0.6667. Further upside is seen at 0.6700. On the other hand, if sellers drag the AUD/USD below 0.6600, further downside is seen, with the confluence of the 50 and the 100-DMA at 0.6573/75 seen as first support, followed by the 200-DMA at 0.6560.

• AUD/USD falls sharply to 0.6600 as US Dollar rises after stubborn US inflation data.
• The hot US inflation report has dented market expectations for Fed rate cuts in the June meeting.
• RBA Hunter warned about the deepening cost-of-living crisis.

The AUD/USD pair falls to the round-level support of 0.6600 as the hotter-than-expectations United States Consumer Price Index (CPI) data for February has dented appeal for antipodeans. The Aussie asset weakens as stubborn US inflation data has improved the appeal for the US Dollar.

The appeal for risk-perceived currencies has dampened as investors rush for safe-haven assets. The US Dollar Index (DXY) delivers a V-shape recovery to 103.30 as expectations that the Federal Reserve (Fed) will reduce interest rates in the June meeting could wane. 10-year US Treasury yields have climbed to near 4.15%.

The hot inflation data is expected to increase uncertainty over Fed rate cuts. Last week, Fed Chair Jerome Powell said in his Congressional testimony that it would be inappropriate to start lowering interest rates before gaining conviction that inflation will sustainably return to the 2% target. Powell also said that the central bank is not far from gaining that conviction, but the inflation data for February tells a different story.

Going forward, market participants will shift focus to the US Producer Price Index, (PPI) and monthly Retail Sales data for February, which will be published on Thursday.

On the Australian front, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said, “For some households, interest rate hikes are also challenging and difficult, but inflation is the single biggest drag,” at the Australian Financial Review business summit in Sydney in Tuesday’s Asian session, reported by Bloomberg.

Next week, the RBA will announce the monetary policy decision in which policymakers are expected to keep the Official Cash Rate (OCR) unchanged at 4.35%.

• AUD/USD slightly down in early Asian trading, reflecting Monday's cautious market mood.
• US inflation expectations set for Tuesday's release, with forecasts suggesting varied changes in CPI figures.
• Australian economic outlook to be clarified with upcoming consumer and business confidence polls, alongside building permits data.

The AUD/USD begins Tuesday’s Asian session with minuscule losses, following Monday’s -0.19% performance on a risk-off impulse as traders brace for the release of US inflation data. At the time of writing, the pair exchanges hands at 0.6612, with losses of 0.02%.

Aussie Dollar’s await domestic and US inflation data

Wall Street ended Monday’s session with losses. Data-wise, the US New York Fed Inflation expectations report for one year was anchored at 3%, unchanged from the previous reading. On Tuesday, the US Bureau of Labor Statistics (BLS) is expected to reveal that inflation in February stood at 3.1% in yearly figures, while monthly figures would aim high from 0.3% to 0.4%. The Core Consumer Price Index (CPI) is expected to drop in annual and monthly data, at 3.7% from 3.9% and 0.3% from 0.4%.

If the data comes higher than expected, that can pave the way for further AUD/USD downside, as traders would trim bets that the US Federal Reserve would ease policy as soon as June. Otherwise, that could open the door for discussions at the May meeting.

On Australia’s front is the ANZ Consumer Confidence Poll and the NAB Business Confidence for February are going to be released. After those two polls, traders await Building Permits data for January, which is expected to improve from -10.1% to -1%.

AUD/USD Price Analysis: Technical outlook

The AUD/USD has printed back-to-back bearish candles that could be forming an ‘evening star’ chart pattern that could open the door for a pullback. If sellers drag the exchange rate below 0.6600, that could open the door toward the 50-day moving average (DMA) at 0.6576, ahead of the 100-DMA at 0.6572. Further losses are seen below the 200-DMA at 0.6560, exposing the 0.6500 mark. On the other hand, traders need to conquer the March 11 high at 0.6627 before challenging 0.667, March 8’s high.

• AUD/USD falls sharply to 0.6600 as safe-haven appeal improves ahead of US Inflation data.
• The USD Index rebounds to 102.90 even though the Fed rate-cut expectations remain firm.
• RBA Hunter is expected to provide GDP projections at Australia’s Financial Review's Business Summit on Tuesday.

The AUD/USD pair faces a sharp sell-off and drops to the round-level support of 0.6600 in the early New York session on Monday. The Aussie asset tumbles as uncertainty ahead of the United States Consumer Price Index (CPI) data for February has dented risk appetite of the market participants.

The monthly headline inflation is forecasted to have risen by 0.4% against a 0.3% increase in January. The core CPI that excludes volatile food and energy prices is expected to have grown at a slower pace of 0.3% from 0.4%. For annual figures, economists expect that the headline CPI remains sticky at 3.1% and the core inflation decelerates to 3.7% from 3.9% in January.

Considering negative overnight futures, the S&P 500 is expected to open on a negative note. The US Dollar Index (DXY) rebounds to 102.90 though market expectations for the Federal Reserve (Fed) reducing interest rates in the June policy meeting remain firm. The CME FedWatch tool shows a 72% chance for a rate-cut decision in June.

Meanwhile, the next move in the Australian Dollar will be guided by the Australia’s Financial Review's Business Summit, scheduled for Tuesday. Reserve Bank of Australia’s (RBA) recently appointed chief economist, Sarah Hunter, is expected to deliver Gross Domestic Product (GDP) projections and the economic risks.

AUD/USD drops after failing to deliver a decisive break above the horizontal resistance of the Ascending Triangle pattern formed on a daily timeframe, which is plotted from the January 24 high at 0.6621. The upward-sloping border of the chart pattern is placed from the February 13 low at 0.6319.

The triangle could break out in either direction. However, the odds marginally favor a move in the direction of the trend before the formation of the triangle – in this case, up. A decisive break above or below the triangle boundary lines would indicate a breakout is underway.

The 14-period Relative Strength Index (RSI) falls back into the 40.00-60.00 region, which indicates persistent indecisiveness among investors.

Shorts buildups for the Aussie asset may swell if it breaks below February 20 high at 0.6579. This would drag the asset towards February 26 low at 0.6530, followed by the psychological support of 0.6500.

On the contrary, the Australian Dollar will strengthen if the asset climbs above December 4 high at 0.6688. This would drive the pair towards January 11 high at 0.6728 and January 4 high at 0.6760.

AUD/USD daily chart

• AUD/USD kicks off the new week on a weaker note in reaction to mixed Chinese inflation figures.
• A softer risk tone also undermines the Aussie, though subdued USD demand lends some support.
• Traders might also prefer to wait on the sidelines ahead of the crucial US CPI report on Tuesday.

The AUD/USD pair extends Friday's retracement slide from the 0.6665-0.6670 region, or its highest level since mid-January and remains under some selling pressure on the first day of a new week. Spot prices remain on the defensive through the first half of the European session and currently trade just above the 0.6600 round-figure mark, though any meaningful corrective slide seems elusive.

Mixed Chinese inflation figures released over the weekend failed to ease concerns about deflation, which, along with US-Sino trade tensions, turn out to be key factors undermining the China-proxy Australian Dollar (AUD). In fact, China’s Consumer Price Index (CPI) rose for the first time in four months, while the Producer Price Index slipped by the 2.7% YoY rate during the reported month. Adding to this, Bloomberg reported that Washington is weighing sanctions on several Chinese tech companies, which, along with a generally weaker tone around the equity markets, undermines the risk-sensitive Aussie.

The US Dollar (USD), on the other hand, struggles to attract any meaningful buyers or build on Friday's recovery from its lowest level since mid-February amid bets for an imminent shift in the Federal Reserve's (Fed) policy stance. Market participants now seem convinced that the US central bank will start cutting interest rates in June and the expectations were reaffirmed by a spike in the US jobless rate. This keeps the yield on the benchmark 10-year US government bond depressed near a more than one-month low, which keeps the USD bulls on the defensive and should lend some support to the AUD/USD pair.

Traders might also refrain from placing aggressive directional bets and prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due for release on Tuesday. The crucial US CPI report will play a key role in influencing expectations about the Fed's rate-cut path, which, in turn, will drive the USD demand and provide some meaningful impetus to the AUD/USD pair. In the meantime, spot prices remain at the mercy of the USD price dynamics and the broader risk sentiment in the absence of any relevant market-moving economic releases from the US on Monday.
 

• AUD/USD trades on a weaker note near 0.6620 in Monday’s early Asian session. 
• US Nonfarm payrolls increased by 275K in February; Unemployment Rate rose more than expected to 3.9%.
• Chinese CPI rose for the first time in six months, coming in at 0.7% YoY in February vs. -0.8% prior. 

The AUD/USD pair trades with a mild negative bias above the 0.6600 psychological mark during the early Asian session on Monday. The pair edges lower due to the modest rebound of the US Dollar (USD) to 102.75 after retreating to 102.40. Investors will closely watch the US Consumer Price Index (CPI) and Retail Sales data this week for fresh impetus. At press time, AUD/USD is trading at 0.6620, unchanged for the day. 

The US Nonfarm Payrolls rose by 275K in February from 229K in January, better than the expectation of 200K. Meanwhile, Average Hourly Earnings arrived at 4.3% YoY, below the estimation and the previous reading of 4.4%. The Unemployment Rate climbed to 3.9% from 3.7% in January. 
 
The Federal Reserve Chair Jerome Powell said last week during his semiannual testimony that the labor market is relatively tight, but supply and demand conditions have continued to come into better balance. The markets believe that the Fed will need more data to be confident that the supply of labor is recovering. According to the CME FedWatch Tool, traders have nearly fully priced a June rate cut and almost 100 basis points (bps) by year-end.

On the other hand, the Chinese Consumer Price Index (CPI) climbed for the first time in six months due to spending linked to the Lunar New Year. China rose 0.7% YoY in February from a 0.8% decline in January, above the market consensus of a 0.3% increase, the first monthly rise since August 2023. The Producer Price Index (PPI) fell 2.7% YoY in February, compared to expectations and the previous January’s reading of a 2.5% decline. The Chinese CPI inflation data provides some relief to the world's second-largest economy and lifts the China-proxy Australian Dollar (AUD). 

Looking ahead, market players will keep an eye on the US February CPI and Retail Sales on Tuesday and Thursday this week, respectively. On the Aussie docket, the Westpac Consumer Confidence for March will be due on Tuesday. These events could give a clear direction to the AUD/USD pair. 

• Australian Dollar rises and marks its third consecutive day of gains.
• US Nonfarm Payrolls outperform expectations at 275K, but rising unemployment and lower wage growth hint at a cooling job market.
• AUD/USD's rally supported by dipping US 10-year Treasury yields and a weakening Dollar Index, amid global monetary policy recalibrations.

The Australian Dollar advanced for the third straight trading day, early in the North American session, edges up 0.35% and exchanges hands at 0.6654.

Aussie Dollar’s strengthens as US Dollar extends its weekly losses

Recently released data by the US Department of Labor revealed the US Nonfarm Payrolls for February exceeded estimates of 200K, came at 275K, and was higher than January’s downward revised 353K reading to 229K. Further data underscored that the jobs market is cooling as the Unemployment Rate increased from 3.7% to 3.9%, while Average Hourly Earnings edged lower in monthly and annual figures.

The AUD/USD extended its rally toward a daily high of 0.6664, while US Treasury bond yields edged lower. The US 10-year benchmark note rate is down to 4.044%, the lowest level since February 2.

At the same time, the US Dollar Index (DXY) is tumbling 0.25%, sitting at 102.52, threatening to drop to an eight-week low.

New York Fed Williams: Neutral interest rates “still quite low”

Earlier, the New York Fed President John Williams said the restrictive monetary stance has cooled demand, adding that the Fed is responsible for achieving price stability. He said the Fed doesn’t consider politics in deliberations and stated the economy in 2023 was remarkable.

Aside from this, Australian data revealed during the week showed a surplus in the Trade Balance, while the economy grew 0.2% QoQ in Q4 2023, below estimates of 0.3%. On a yearly basis, the economy expanded 1.5% YoY, above estimates but shy of the previous reading of 2.1%.

AUD/USD Price Analysis: Technical outlook

The AUD/USD sitting above the 0.6600 figure, has opened the door for further upside, as confirmed by Relative Strength Index (RSI) studies at bullish territory. If buyers extend the rally toward 0.6700, that could open the door for testing the January 5 high at 0.6747, before challenging the 0.6800 mark. On the other hand, a pullback below the January 5 low of 0.6640, could exacerbate a test of the 0.6600 figure.

AUD/USD is testing the water above the 0.6600 level for the first time since early February. Economists at Rabobank analyze the pair’s outlook.

Potential for further dips back to 0.6500 in the one-to-three-month horizon

• AUD/USD climbs above 0.6600, rallying 0.82% after Powell hints at upcoming Fed rate adjustments.
• ECB's resistance to early easing contrasts with Powell's openness to rate cuts based on inflation trends.
• US labor market shows resilience with steady unemployment claims; trade deficit widens more than expected.

The Australian Dollar rallied against the US Dollar in late trading on Thursday after Fed Chair Jerome Powell's second day of testimony before the US Congress. The AUD/USD trades above the 0.6600 figure, posting gains of 0.82% as investors look for the Fed’s first rate cut.

AUD/USD strengthens amid Fed’s rate cut speculations

The financial markets' narrative revolves around when the major central banks will cut rates. On Thursday, the European Central Bank (ECB) pushed back against easing in April, sticking to its data dependence and noted that it would have more data to assess the appropriate restrictiveness of monetary policy in June.

Meanwhile, Fed Chair Jerome Powell reiterated the US central bank stance, suggesting they would begin to cut borrowing costs at some point in the year. Nevertheless, he added that it would depend on the inflation path, moving sustainably towards the Fed’s 2% goal.

Regarding the labor market, which, according to Powell, remains robust, the number of Americans filling for unemployment claims rose by 217,000, unchanged from the previous week, an exceeded estimate of 215,000.

Other data showed that the US trade deficit widened from $-64.2 billion to $-67.4 billion, exceeding forecasts, according to the US Department of Commerce.

What to watch?

The Australian economic docket is empty. In the US, February’s Nonfarm Payrolls are expected to drop from 353K to 200K, in tune with the ongoing economic slowdown. The Unemployment Rate is expected to remain unchanged at 3.7%.

AUD/USD Price Analysis: Technical outlook

the AUD/USD has risen more than 1.50% during the last two days, clearing key resistance levels on its way up. For a bullish continuation, buyers need to reclaim the January 5 low-turned resistance at 0.6640, ahead of challenging 0.6650. Further upside is seen at 0.6747, the January 5 high. On the other hand, if sellers push prices below 0.6600, look for a correction towards the confluence of the 100 and 200-day moving averages (DMAs) at 0.6560/65.

• AUD/USD jumps to 0.6600 as the appeal for risk-sensitive assets improves.
• The US Dollar will be guided by Fed Powell’s testimony and US NFP data.
• Market expectations for Fed rate cuts in June escalate.

The AUD/USD pair rallies to the round-level resistance of 0.6600 in the early New York session on Thursday. The Aussie asset witnesses significant buying interest as the risk appetite of the market participants has increased on expectations that the Federal Reserve (Fed) will start reducing interest rates from the June policy meeting.

Considering positive overnight futures, the S&P 500 is expected to open on a bullish note, indicating an upbeat market mood. 10-year US Treasury yields have dropped to 4.07%. Increasing market expectations for a Fed rate cut in June have reduced yields on interest-bearing government bonds. The US Dollar Index (DXY) slumps to 103.20 as uncertainty deepens over United States growth momentum outlook.

The US Employment data, released on Wednesday, indicated that labor market conditions are easing. The ADP Research Institute reported that hiring by private employers was lower at 140K against expectations of 150K in February. In January, jobs posted by US employers were slightly lower at 8.863 million vs. 8.9 million in December.

Going forward, investors will get more insights into the labor market after the release of the US Nonfarm Payrolls (NFP) data for February, which will be published on Friday.

Meanwhile, investors await Federal Reserve (Fed) Chair Jerome Powell's testimony before Congress at 15:00 GMT. Investors would like to know when the Fed will start reducing interest rates.

In the Asia-Pacific region, investors await China’s inflation data for February, which will be published on Saturday. The monthly Consumer Price Index (CPI) data is forecasted to have risen by 0.4%. The annual CPI data is expected to have increased at a higher pace of 0.5% against 0.3% in January. Higher price pressures would indicate an increase in consumer spending.

It is worth noting that Australia is the leading trading partner of China, and improving China’s economic prospects strengthen the Australian Dollar.

Economists at CIBC Capital Markets expect the AUD/USD pair to hover around the 0.6600 level over the coming months.

The RBA will maintain a mildly hawkish tone, but less so than the RBNZ

• AUD/USD attracts buyers for the second straight day amid subdued US Dollar price action.
• Bets that the Fed will start cutting interest rates in June keep the USD bulls on the defensive.
• The upbeat Chinese Trade Balance also lend support, though a softer risk tone might cap gains.

The AUD/USD pair gains positive traction for the second successive day on Thursday and climbs back closer to the 0.6600 mark during the early part of the European session. Bulls are now looking to build on the momentum beyond a technically significant 200-day Simple Moving Average (SMA) and the recent recovery from the 0.6480-0.6475 area, or a multi-week low touched on Tuesday amid subdued US Dollar (USD) demand.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near its lowest level since early February amid the uncertainty over the Federal Reserve's (Fed) rate cut path. In fact, Fed Chair Jerome Powell, during his semi-annual congressional testimony on Wednesday, told lawmakers that the central bank will cut interest rates this year if there is more evidence that inflation is falling to the 2% target. Minneapolis Fed President Neel Kashkari, however, downplayed bets for a more aggressive policy easing and said that he may reduce the number of cuts in 2024, to only one in the wake of the incoming stronger macro data.

The mixed signals, meanwhile, limit the downside for the US Treasury bond yields, which, along with a generally weaker tone around the equity markets, could act as a tailwind for the safe-haven Greenback. That said, China's stronger export and import growth in the January-February period, to a larger extent, helps offset the negative factor and supports prospects for a further near-term appreciating move for the AUD/USD pair. Traders now look to Fed Chair Powell's second day of testimony, which, along with the US Weekly Initial Jobless Claims and Trade Balance data, will drive the USD, though the focus remains glued to the US NFP report on Friday.

• AUD/USD tested into nine-day high after Fed knocked the Greenback lower.
• Soft Aussie GDP limits gains as markets await another Fed outing.
• US NFP Friday still looms over the horizon.

AUD/USD knocked into a two-week high near 0.6580 after Federal Reserve (Fed) Chairman Jerome Powell kicked the legs out from underneath the US Dollar (USD) on Wednesday. Fed Chair Powell noted that the Fed doesn’t see increased risk of an economic recession in the US this year while testifying before the US Congressional House Financial Services Committee. The head of the US central bank is expected to deliver further comments on Thursday when he appears for day two of the Fed’s Semi-Annual Monetary Policy Report.

Jerome Powell Speech: Fed Chair says they are not climate change policymakers

Australia’s latest Gross Domestic Product (GDP) print early Wednesday capped gains for the Aussie (AUD), coming in below market expectations to print at 0.2% for the fourth quarter compared to the previous quarter’s 0.3%, which was revised slightly higher from 0.2%. Australia’s Trade Balance for February lands early Thursday at 00:30 GMT, and is expected to print at 11.5 billion after the previous month’s 10.959 billion.

China’s Trade Balance (in USD terms) is also expected early Thursday at 03:00 GMT, and is expected to drive market sentiment in the Asia market session. China’s USD-denominated Trade Balance for February is forecast to jump to $103.7 billion versus January’s $75.34 billion on mixed trade results. Chinese Imports are expected to climb 1.5% versus the previous 0.2%, while Exports growth is expected to slow to 1.9% from the previous 2.3%.

Friday’s US Nonfarm Payrolls (NFP) will wrap up the trading week, and markets are expecting the key jobs data to print at 200K for February compared to January’s 11-month high of 353K.

AUD/USD technical outlook

The AUD/USD climbed into a familiar technical resistance zone near 0.6580 before facing a rejection, dragging the pair back into 0.6560 and keeping the Aussie hung up in a thin chart region in the near-term.

Wednesday’s bullish candle represents one of the pair’s strongest performances since December, but the pair has run into a technical ceiling at the 200-day Simple Moving Average (SMA) near 0.6560, and bullish momentum is set to falter back into the 0.6500 handle is sellers return to the fold.

AUD/USD hourly chart

AUD/USD daily chart

• AUD/USD surpasses key resistance levels, as Powell's testimony suggests peak interest rates.
• Soft US job data and Powell's cautious stance on rate cuts fuel optimism for AUD, highlighting a shift in Fed policy outlook.
• US ADP report and JOLTS data show job market resilience, adding a complex layer to economic evaluations.

The Australian Dollar soars against the US Dollar in the mid-North American session as Federal Reserve Chair Jerome Powell testifies at the US Senate and opens the door for rate cuts later in the year. That and “soft” jobs data underpins the AUD/USD above a key resistance level and trades at 0.6573, up more than 1%.

AUD/USD conquers key technical confluence of 100 and 200-DMAs, amid soft US data and Powell comments

In his testimony before the US Senate Banking Committee on Capitol Hill, US Federal Reserve Chair Jerome Powell indicated that interest rates had reached their peak and suggested that it would be premature to consider reducing rates in the near future. He expressed confidence in the progress towards achieving the Fed's inflation target of 2%.

In the Q&A session, Chair Powell emphasized that any future rate cuts would be data-dependent, underscoring the importance of precise monetary policy adjustments over rapid rate reductions. He noted that inflation is on a downward trend and conveyed optimism about the economy, stating there is no imminent risk of recession in the near term.

On the data front, the February US ADP National Employment Report revealed that private companies added 140,000 jobs, falling short of the anticipated 150,000 hires but still surpassing the 111,000 job increase reported in January. Recently, the US Job Openings and Labor Turnover Survey (JOLTS) for January reported 8.863 million job openings, which did not meet expectations and was slightly below the previous month's figures of 8.9 million and 8.889 million, respectively.

Meanwhile, AUD/USD traders will consider the Australian Balance of Trade and Chinese economic data. On the US front, traders are eyeing the Initial Jobless Claims report, the Balance of Trade, and the testimony of Fed Chair Powell at the US House of Representatives.

AUD/USD Price Analysis: Technical outlook

The AUD/USD bounced off the week's lows and reclaimed the 100 and 200-day moving averages (DMAs) at around 0.6560/61, extending its gains toward 0.6581. Despite that, buyers failed to conquer the 50-DMA at 0.6591, which could open the door for a pullback. A breach of the latter will expose 0.6600. On the other hand, if sellers stepped in and pushed the price below 0.6560, that could pave the way to challenge 0.6500, ahead of the March 5 swing low of 0.6477.

The Australian Dollar (AUD) weakened modestly in February against the US Dollar (USD) from 0.6596 to 0.6503. Economists at MUFG Bank analyze Aussie’s outlook.

Gradual appreciation beyond short-term risks

• AUD/USD gains some positive traction and builds on the overnight recovery from a multi-week low.
• Optimistic remarks by China’s NDRC and PBoC Governor boost the Aussie amid a softer Greenback.
• Traders now look to the US macro data for some impetus ahead of Fed Chair Powell’s testimony.

The AUD/USD pair attracts some buying following an intraday dip to sub-0.6500 levels on Wednesday and moves further away from a three-week low touched the previous day. The momentum lifts spot prices to the 0.6525 region during the early part of the European session, though lacks follow-through or bullish conviction.

The Australian Dollar (AUD) gets a minor lift in reaction to optimistic remarks by China’s National Development and Reform Commission (NDRC), saying that the country’s 2024 growth target is in line with the economic potential. The NDRC added that the economy is likely to see a good start in Q1 and that the recovery will be consolidated and strengthened. Adding to this, the People’s Bank of China (PBoC) Governor Pan Gongsheng noted that the central bank still has sufficient room for monetary policy and there is room for cutting RRR. This, to a larger extent, overshadows unimpressive domestic data, showing that Australia's economy eked out a modest 0.2% growth in the December quarter.

Apart from this, a modest US Dollar (USD) weakness turns out to be a key factor pushing the AUD/USD pair higher. The markets have been pricing in a greater chance, around 70% for the first interest rate cut by the Federal Reserve (Fed) in June. Moreover, the US ISM PMI showed on Tuesday that growth in the services sector slowed in February, which further keeps the USD bulls on the defensive and remains supportive of the AUD/USD pair's intraday uptick. Traders, however, might refrain from placing fresh USD bearish bets ahead of Fed Chair Jerome Powell's congressional testimony, which will be scrutinized closely for fresh cues about the rate-cut path and provide some meaningful impetus.

Market participants on Wednesday will also confront the release of the US ADP report on private-sector employment and JOLTS Job Openings data, due later during the early North American session. This, along with the broader risk sentiment, will drive the USD and produce short-term opportunities around the AUD/USD pair ahead of Chinese trade balance data on Thursday. The attention will then turn to the closely watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. Nevertheless, spot prices, for now, seem to snapped a two-day losing streak and remain at the mercy of the USD price dynamics. 

• AUD/USD dips 0.06%, peaking at 0.6521, swayed by recent US S&P Global and ISM reports.
• Australia's Q4 GDP forecast: steady quarterly growth, but slower annual expansion anticipated.
• Fed Chair Powell's testimony awaited, likely emphasizing caution on inflation and job market.

The AUD/USD is set to finish Tuesday’s session with minimal losses of 0.06% after hitting a daily high of 0.6521 amid soft business activity data in the United States (US), revealed by S&P Global and the Institute for Supply Management (ISM). At the time of writing the pair exchanges hands at 0.6495.

AUD/USD drops despite soft US PMI figures fueling Fed rate cuts; eyes on Aussie’s GDP and Powell testimony

Wall Street sets a downbeat tone as big tech equities fall. Softer than expected, Purchasing Managers Indices revealed by S&P Global and the ISM witnessed a tick up in the AUD/USD pair, as traders increased bets the US Federal Reserve will ease policy as soon as June. S&P Global Services PMI came at 52.3 in February, down from 52.5, while the Composite Index stood at 52.5, above estimates of 51.4. Nevertheless, the ISM Services PMI, the most widely sought by investors, rose 52.6, below estimates of 53, and trailed January’s 53.4.

In the meantime. AUD/USD traders are eyeing the release of Australia’s Gross Domestic Product (GDP) preview for the last quarter of 2023. Forecasts suggest the economy grew 0.3% QoQ unchanged, and annually based decreased from 2.1% to 1.4%.

Aside from that, the next major event would be the testimony of the Federal Reserve Chairman Jerome Powell at Capitol Hill against the Senate Banking Committee. Most analysts estimate Powell to remain slightly hawkish and would emphasize that patience is required. He would state that the jobs market remains strong and that inflation continues to trend lower.

AUD/USD Price Analysis: Technical outlook

After reaching a three-week low of 0.6477 earlier in today’s session, the AUD/USD staged a comeback and hovered circa the 0.6500 figure. Nevertheless, buyers must reclaim the latter, so they can remain hopeful of higher prices. Next key resistance levels lie at March 4 high at 0.6535, followed by the confluence of the 100 and 200-days moving average (DMAs) at around 0.6559/60. Up next would be the 0.6600 figure.  On the other hand, a drop below the current weekly low will sponsor a leg-down toward the February 13 low of 0.6442, followed by the 0.6400 mark.

After a brief roller coaster ride, AUD/USD is now trading at the same level as at the end of November. Economists at Commerzbank analyze the pair’s outlook.

Cautious RBA provides support

Source: Commerzbank Research

• AUD/USD oscillates in a range on Monday and is influenced by a combination of diverging forces.
• Hopes for additional stimulus from China lends support to the Aussie amid subdued USD demand.
• The cautious market mood caps gains amid bets that the RBA will not hike interest rates further.

The AUD/USD pair lacks any firm intraday direction on the first day of a new week and seesaws between tepid gains/minor losses through the first half of the European session. Spot prices currently trade around the 0.6520-0.6525 area, unchanged for the day and remain well within the striking distance of a nearly three-week low touched last Thursday.

Traders opt to wait on the sidelines ahead of the Federal Reserve (Fed) Chair Jerome Powell's congressional testimony on Wednesday and Thursday, which might provide cues about the rate-cut path and influence the US Dollar (USD). Apart from this, important US macro data scheduled at the beginning of a new month, including the closely-watched Nonfarm Payrolls (NFP) on Friday, should provide a fresh directional impetus to the AUD/USD pair.

In the meantime, Friday's disappointing release of the US ISM Manufacturing PMI and the University of Michigan’s Consumer Sentiment Index, along with less-hawkish remarks by Fed officials, reaffirmed bets for a June rate cut. This keeps the USD bulls on the defensive and acts as a tailwind for the AUD/USD pair. Apart from this, hopes for additional stimulus measures from China turn out to be another factor lending some support to the Australian Dollar (AUD).

That said, a slight deterioration in the global risk sentiment – as depicted by a softer tone around the US equity futures – holds back traders from placing aggressive bullish bets around the risk-sensitive Aussie. Apart from this, growing acceptance that the Reserve Bank of Australia (RBA) will not hike rates further, bolstered by last week's rather unimpressive domestic inflation figures and weaker Retail Sales data, contributes to capping the upside for the AUD/USD pair.

Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom and positioning for any meaningful appreciating move. In the absence of any relevant US macro data on Monday, the US bond yields will play a key role in driving the USD demand. Apart from this, the broader risk sentiment should influence the USD price dynamics and produce short-term opportunities around the AUD/USD pair.