Created
: 2024.11.05
2024.11.05 11:16
The Australian Dollar (AUD) maintains its position after registering gains in the previous session following improved Purchasing Managers Index (PMI) data released on Tuesday. Traders await the Reserve Bank of Australia's (RBA) interest rate decision scheduled to be released later in the day.
The final reading of Australia's Judo Bank Services PMI improved to 51.0 in October from 50.6 in the previous reading. This figure was above the market consensus of 50.6. The Composite PMI climbed to 50.2 in October versus 49.8 prior. Additionally, Caixin China Services PMI rose to 52.0 in October from 50.3 in September.
The Reserve Bank of Australia is anticipated to keep the Official Cash Rate (OCR) steady at 4.35%, marking an eighth consecutive pause in November. The central bank is expected to hold current rates following its policy meeting.
Traders will likely focus on the RBA's updated economic forecasts and Governor Michele Bullock's press conference for new insights on the potential timing of the bank's first rate cut since its post-COVID tightening cycle.
Investors will closely monitor the outcome of the US presidential election. Former President Donald Trump and Vice President Kamala Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close US presidential election.
AUD/USD trades near 0.6590 on Tuesday, with the daily chart hinting at a potential easing of the bearish trend as the pair tests the nine-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) remains below 50, indicating that the bearish outlook persists.
On the resistance side, AUD/USD faces the nine-day EMA at 0.6596, with further resistance at the 14-day EMA at 0.6618. A break above these levels could strengthen the pair, possibly aiming for a psychological level of 0.6700.
In terms of support, immediate support is around the three-month low at 0.6536. A drop below this level could drive the pair toward the key psychological support at 0.6500.
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 | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.03% | -0.03% | 0.03% | -0.01% | -0.10% | -0.10% | -0.01% | |
EUR | 0.03% | 0.00% | 0.07% | 0.01% | -0.10% | -0.07% | 0.02% | |
GBP | 0.03% | -0.00% | 0.04% | -0.01% | -0.11% | -0.08% | 0.02% | |
JPY | -0.03% | -0.07% | -0.04% | -0.05% | -0.15% | -0.17% | -0.05% | |
CAD | 0.01% | -0.01% | 0.00% | 0.05% | -0.09% | -0.09% | 0.00% | |
AUD | 0.10% | 0.10% | 0.11% | 0.15% | 0.09% | -0.00% | 0.10% | |
NZD | 0.10% | 0.07% | 0.08% | 0.17% | 0.09% | 0.00% | 0.10% | |
CHF | 0.00% | -0.02% | -0.02% | 0.05% | -0.01% | -0.10% | -0.10% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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.
Created
: 2024.11.05
Last updated
: 2024.11.05
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