- The Australian Dollar maintains its position despite flat Retail Sales in July.
- Retail Sales in Australia showed no growth month-on-month in July, falling short of the anticipated 0.3% increase.
- The US Dollar gained support from stronger-than-expected US GDP data for Q2.
The Australian Dollar (AUD) remains stable against the US Dollar (USD) following Friday's Retail Sales report, which showed no growth in July, missing the expected 0.3% increase and the previous 0.5% rise. Despite this, stronger-than-expected US Gross Domestic Product (GDP) data for Q2 has exerted pressure on the AUD/USD pair.
The AUD/USD pair might see potential gains due to July’s higher-than-expected Monthly Consumer Price Index (CPI), which has increased speculation that the Reserve Bank of Australia (RBA) could adopt a more hawkish stance. Recent RBA Minutes also indicated that board members consider a rate cut unlikely in the near future.
While the US Dollar received support from robust economic data, dovish remarks from Federal Reserve officials could limit its gains. On Thursday, Atlanta Fed President Raphael Bostic suggested it might be "time to move" on rate cuts due to cooling inflation and a higher-than-expected rise in the unemployment rate, according to Reuters.
Markets are fully expecting at least a 25 basis point (bps) rate cut by the Fed at its September meeting, as per the CME FedWatch Tool. Investors will closely monitor Friday’s release of the US Personal Consumption Expenditure (PCE) Price Index for July for further insights into the future direction of US interest rates.
Daily Digest Market Movers: Australian Dollar edges up after Retail Sales report
- The US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, surpassing both the expected and previous growth rate of 2.8%. Additionally, Initial Jobless Claims fell to 231,000 for the week ending August 23, down from 233,000 the previous week and slightly below the forecasted 232,000.
- US Core Personal Consumption Expenditures (QoQ), the Federal Reserve's preferred measure of underlying inflation, increased by 2.8% in the second quarter, just under the market forecast of 2.9%. This represents a significant slowdown from the 3.7% growth recorded in the first quarter.
- Australia’s Private Capital Expenditure unexpectedly dropped by 2.2% in the second quarter, reversing from an upwardly revised 1.9% increase in the previous period and falling short of the anticipated 1.0% rise. This is the first contraction in new capital expenditure since the third quarter of 2023.
- Australia's Monthly Consumer Price Index (CPI) rose by 3.5% year-on-year in July, down from June’s 3.8% but slightly above the expected 3.4%. Despite the decrease, it marks the lowest CPI figure since March.
- San Francisco Federal Reserve President Mary Daly indicated on Monday in an interview with Bloomberg TV that it might be time to start cutting interest rates, possibly beginning with a 25 basis point reduction. Daly suggested that if inflation continues to decline gradually and the labor market maintains steady job growth, adjusting policy at a regular pace would be reasonable.
- FOMC Minutes from July’s policy meeting revealed that most Fed officials agreed they would likely lower the benchmark interest rate at the upcoming September meeting if inflation continued to ease.
- On Tuesday, the RBA Minutes showed that board members had considered a rate hike earlier this month but decided to maintain current rates to better balance risks. The RBA members also agreed that a rate cut is unlikely in the near future.
Technical Analysis: Australian Dollar maintains position near 0.6800
The Australian Dollar is trading around 0.6790 on Friday. Analyzing the daily chart, the AUD/USD pair appears to be testing the lower boundary of its ascending channel, which could reinforce the bullish bias. The 14-day Relative Strength Index (RSI) remains just below 70, supporting the current bullish trend.
In terms of resistance, the AUD/USD pair is testing the immediate barrier at the lower boundary of the ascending channel, close to the seven-month high of 0.6798. A break above this level could pave the way for the pair to target the upper boundary of the channel, around the 0.6920 level.
On the downside, the AUD/USD pair may find support near the nine-day Exponential Moving Average (EMA) at 0.6761. A drop below this EMA could weaken the bullish outlook and apply downward pressure, potentially leading the pair to test the throwback level at 0.6575, followed by another throwback level at 0.6470.
AUD/USD: Daily Chart
