Australian Dollar rebounds from three-month lows due to hawkish RBA

• The Australian Dollar recovers its recent losses due to the hawkish RBA.
• Australia's 10-year government bond yield eased to near 4.66%, pulling back from a one-year high.
• The US Dollar may appreciate following hawkish comments from Fed officials.

The Australian Dollar (AUD) extends its gains for a second consecutive session on Monday, supported by hawkish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock last Thursday. Bullock emphasized that current interest rates are sufficiently restrictive and will remain unchanged until the central bank is confident about the inflation outlook.

Australia's 10-year government bond yield eased slightly to around 4.66%, retreating from a one-year high. Recent data indicated a slowdown in employment growth for October, while the unemployment rate held steady, highlighting the resilience of the labor market. Market focus now shifts to the release of the latest RBA meeting minutes on Tuesday, which could offer further insights into the central bank's policy stance.

The AUD/USD pair's upside could be restrained as the US Dollar (USD) may continue to strengthen, driven by recent hawkish remarks from Federal Reserve (Fed) officials and stronger-than-expected US economic data.

Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to be in a hurry to lower rates."

Australian Dollar extends gains as RBA holds hawkish stance regarding policy outlook

• Federal Reserve Bank of Chicago President Austan Goolsbee remarked on Friday that markets often overreact to changes in interest rates. Goolsbee emphasized the importance of the Fed adopting a cautious, gradual approach in moving toward the neutral rate.
• Boston Fed President Susan Collins tempered expectations for continued rate cuts in the near term while maintaining market confidence in a potential rate reduction in December. Collins stated, "I don't see a big urgency to lower rates, but I want to preserve a healthy economy."
• The US Census Bureau reported on Friday that Retail Sales increased by 0.4% month-over-month in October, exceeding the market consensus of 0.3%. Additionally, the NY Empire State Manufacturing Index for November posted an unexpected surge, coming in at 31.2 compared to the anticipated 0.7 decline, signaling robust manufacturing activity.
• China's Retail Sales rose 4.8% year-over-year in October, surpassing the expected 3.8% and the 3.2% increase seen in September. Meanwhile, Industrial Production grew by 5.3% YoY, below the forecasted 5.6% and the 5.4% growth recorded in the previous period.
• China's National Bureau of Statistics (NBS) shared its economic outlook during its press conference, noting an improvement in China's consumer expectations in October. The bureau plans to intensify policy adjustments and boost domestic demand, highlighting that recent policies have had a positive impact on the economy.
• The US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, climbed 3.1% YoY, slightly above the anticipated 3.0%.
• Australia's seasonally adjusted unemployment rate held steady at 4.1% in October for the third month in a row, matching market expectations. However, employment change data revealed only 15.9K new jobs added in October, which fell short of the anticipated 25.0K.
• Australia's Consumer Inflation Expectations dropped to 3.8% in November, down from 4.0% in the previous month, reaching the lowest level since October 2021.

Technical Analysis: Australian Dollar rises toward 0.6500 as RSI climbs from oversold zone

AUD/USD hovers around 0.6470 on Monday, reflecting short-term downward pressure on the daily chart as the pair stays below the nine-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) has begun climbing from the 30 level, indicating that selling pressure may be waning and hinting at the potential for an upward correction.

On the downside, the AUD/USD pair may encounter significant support around the 0.6400 level. A breach of this psychological threshold could intensify downward pressure, potentially pushing the pair toward the yearly low of 0.6348, last seen on August 5.

Immediate resistance for the AUD/USD pair is at the psychological level of 0.6500. A break above this could propel the pair toward the nine-day EMA at 0.6514, followed by the 14-day EMA at 0.6542. Clearing these EMAs could open the path for a move toward the three-week high of 0.6687.

AUD/USD: Daily Chart