- The Australian Dollar rebounds as the US Dollar Index retreats from its yearly highs.
- Weak domestic and Chinese economic data could pose headwinds for the Aussie Dollar.
- RBA Governor Bullock confirmed that interest rates will stay unchanged until the bank is assured of a stable inflation outlook.
The Australian Dollar (AUD) extended its recovery from three-month lows against the US Dollar (USD) on Friday, despite challenges from key domestic and Chinese economic data released earlier this week.
China, a critical trading partner for Australia, reported Retail Sales growth of 4.8% year-over-year in October, surpassing the expected 3.8% and improving from 3.2% in September. Meanwhile, Industrial Production rose 5.3% YoY, slightly below the forecast of 5.6% but higher than September’s 5.4% growth.
During a press conference, China’s National Bureau of Statistics (NBS) highlighted improved consumer expectations in October and pledged to intensify policy adjustments to boost domestic demand, emphasizing the positive effects of recent measures on economic performance.
The AUD found some support from less dovish statements by Reserve Bank of Australia (RBA) Governor Michele Bullock. Bullock reaffirmed that the current interest rates are sufficiently restrictive and will remain unchanged until the central bank gains greater confidence in its inflation outlook.
The US Dollar Index (DXY), which measures the greenback against six major currencies, retreated from its yearly high of 107.06 recorded on Thursday, trading near 106.50 at the time of writing. The pullback is attributed to fading enthusiasm for "Trump trades."
Markets are now closely monitoring the release of US October Retail Sales data and comments from Federal Reserve officials. On Thursday, Fed Chair Jerome Powell described the US economy’s recent performance as “remarkably good,” suggesting room for the central bank to gradually ease monetary policy.
This evolving economic backdrop leaves the AUD/USD pair poised for further developments as market participants digest incoming data and central bank commentary.
Australian Dollar Extends Recovery as US Dollar Softens
- The US Producer Price Index (PPI) rose 2.4% year-over-year in October, exceeding the expected 2.3% and the revised 1.9% in September (previously 1.8%). The Core PPI, excluding food and energy, increased 3.1% YoY, marginally surpassing the forecast of 3.0%.
- The US Consumer Price Index (CPI) climbed 2.6% YoY in October, aligning with expectations, while Core CPI grew 3.3% YoY, also as predicted.
- Federal Reserve officials offered a cautious outlook, emphasizing the challenges of controlling inflation. St. Louis Fed President Alberto Musalem underscored the persistence of inflation, while Kansas City Fed President Jeffrey Schmid dismissed hopes for a return to near-zero interest rates as unrealistic.
- Australia’s unemployment rate remained steady at 4.1% in October, meeting expectations for the third consecutive month. However, only 15.9K new jobs were added, falling short of the forecasted 25.0K.
- Consumer Inflation Expectations dropped to 3.8% in November, marking the lowest level since October 2021 and down from 4.0% in October.
- On the global front, China's latest economic stimulus measures underwhelmed markets. The 10 trillion Yuan debt package aimed at easing local government financial pressures fell short of direct stimulus measures, impacting demand prospects for Australia’s largest trading partner.
- Australian Prime Minister Anthony Albanese discussed trade with US President-elect Donald Trump, emphasizing the US trade surplus with Australia and the need for fair trading practices. Meanwhile, Australia's defense minister highlighted the nation's substantial security investments.
Technical Analysis: AUD/USD Outlook
The AUD/USD pair trades near 0.6470 on Friday, facing short-term downward pressure while staying below the nine-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) hovers slightly above 30, signaling potential oversold conditions.
Support Levels: Key support lies near 0.6400. A break below this psychological level could increase bearish momentum, targeting the yearly low of 0.6348, last seen on August 5.
Resistance Levels: Immediate resistance stands at 0.6500, with further targets at the nine-day EMA of 0.6525 and the 14-day EMA of 0.6553. A break above these levels may open the door for a rally toward the three-week high of 0.6687.
The AUD/USD pair remains at a crossroads, with technical indicators suggesting the possibility of an upward correction amid a volatile economic backdrop.
AUD/USD: Daily Chart
