Australian Dollar loses ground despite stronger Westpac Consumer Confidence

• Australian Dollar holds losses despite a 12.8% surge in Westpac Consumer Confidence for November.
• The AUD could regain its ground amid a cautious RBA policy outlook.
• The US Dollar recovers on increasing hopes of the government shutdown ending.

The Australian Dollar (AUD) declines against the US Dollar (USD) on Tuesday after two days of gains. The AUD/USD pair weakens as the US Dollar (USD) receives support from growing hopes for a potential deal to end the United States (US) federal government shutdown in the coming days.

Australia's Westpac Consumer Confidence jumped 12.8% in November to 103.8, surpassing 100 for the first time since February 2022. The rebound follows a 3.5% decline in October and marks the strongest non-pandemic reading in seven years, driven by improving economic conditions and easing external risks.

National Australia Bank's Business Conditions improved slightly to 9 in October from 8 in September, supported by stronger sales and profitability, while employment remained unchanged. Meanwhile, Business Confidence edged down to 6 in the same month from 7 prior.

AUD received support from cautious comments from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser, who highlighted the unusual challenges facing monetary policy and stressed the need to maintain tight conditions to curb inflation. Hauser noted that Australia's monetary policy is navigating a tricky phase, as the economic recovery began with demand already exceeding potential output, leaving limited room for near-term easing.

US Dollar gains ground on growing hopes government shutdown ending

• The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is gaining ground and trading around 99.70 at the time of writing. The Greenback gains support as the US Senate appeared on track to pass a deal to reopen the government. The US ADP Employment Change Weekly is due later in the North American session.
• US President Donald Trump, on Monday, backed a bipartisan deal to end the US government shutdown, signaling a likely reopening within days. Senate Majority Leader John Thune said he expects Trump to sign the bill once Congress passes it.
• The US Senate advanced a government funding bill to end the shutdown, moving it closer toward passage by voting 60-40 in the first approval on extending the enhanced Affordable Care Act subsidies. The amended proposal would still have to be passed by the House of Representatives and sent to President Donald Trump for his signature, a process that could take several days.
• President Trump issued a premonition that inflation will reach 1.5% "pretty soon", a level of inflation that has evaded the US economy for nearly four years after shooting above that level in February of 2021. 1.5% inflation is also well below the long-run average for US inflation over ten years.
• US Treasury Secretary Scott Bessent said on Monday that the US federal shutdown impact getting worse for the economy. Making substantial progress on inflation and expecting prices to come down over the coming months, Bessent added.
• China's Ministry of Commerce said that it would temporarily lift its ban on approving exports of "dual-use items" related to gallium, germanium, antimony, and super-hard materials to the US. The suspension takes effect from Sunday until November 27, 2026. Any change in the Chinese economy could impact the AUD as China is a major trading partner for Australia.
• China's Consumer Price Index (CPI) climbed 0.2% year-over-year in October, recovering after a decline of 0.3% in September. The market consensus was for 0% in the reported period. CPI inflation increased 0.2% MoM in October, against 0.1% prior. Producer Price Index (PPI) dropped 2.1% YoY in October, following a 2.3% fall in September. The data came in above the market consensus of -2.2%.
• Australia's Trade Surplus widened to 3,938 million month-over-month (MoM) in September, exceeding the 3,850 million expected and 1,111 million (revised from 1,825 million) in the previous reading. Exports rose by 7.9% MoM in September, swinging from a previous decline of 8.7% (revised from -7.8%). Meanwhile, Imports rose by 1.1% MoM, compared to a previous rise of 3.3% (revised from 3.2%).

Australian Dollar pulls back from 50-day EMA

The AUD/USD pair is trading around 0.6530 on Tuesday. Technical analysis of the daily chart shows the pair consolidating within a rectangle pattern, trading sideways. However, the pair remains above the nine-day Exponential Moving Average (EMA), indicating a stronger short-term momentum.

The immediate barrier lies at the 50-day EMA of 0.6536. A break above this level would improve the medium-term price momentum and support the AUD/USD pair to explore the region around the rectangle's upper boundary, around 0.6630. Further advances would support the pair to approach the 13-month high of 0.6707, recorded on September 17.

On the downside, the AUD/USD pair may find its immediate support at the nine-day EMA of 0.6520, followed by the psychological level of 0.6500. Further support lies at the lower boundary of the rectangle around 0.6470 and the five-month low of 0.6414, which was recorded on August 21.