The Australian dollar continues to have a quiet week, currently trading at 0.6671 in the European session, marking a 0.17% increase today.

With the Australian economy facing challenges, it’s no surprise that today’s confidence indicators are showing a downward trend. The Westpac consumer confidence change declined by 0.5% m/m in September, dropping from 85.0 to 84.6. While this was better than the forecast of -1.2%, it still indicates pessimism among consumers who are worried about potential job losses in a weak economy.

The National Australia Bank’s confidence index fell to -4 in August, reaching its lowest level since November 2023. This decline followed consecutive gains, with confidence dropping across various sectors and business expectations also taking a hit. Both business and consumer sentiment are showing deep pessimism about economic conditions, with business confidence now aligning with consumer sentiment.

The financial markets are experiencing significant fluctuations, with the odds of a rate cut also swinging wildly. Following a lukewarm report on Friday, the probability of a 50-basis point cut surged to 59%, up from 43% before the release, according to CME’s FedWatch. However, this has since dropped to just 27% on Tuesday, ahead of tomorrow’s report. The odds of a rate cut could continue to fluctuate based on inflation data, with markets expecting a 2.6% gain for August, down from 2.9% in the previous reading.

The Federal Reserve is set to meet on Sept. 18 and is widely anticipated to announce its first rate cut after a prolonged period of rate hikes. With inflation under control, the Fed is closely monitoring the US labor market to steer the economy towards a soft landing. While the labor market hasn’t collapsed, recent nonfarm payrolls numbers suggest a cooling trend, potentially leading to a series of rate cuts extending into 2025.

AUD/USD 4-Hr Chart

AUD/USD Technical Analysis

  • AUD/USD is currently testing resistance at 0.6666, with further resistance at 0.6684
  • Support levels are at 0.6643 and 0.6625

Original Post

Analysis:

The Australian dollar is facing challenges as economic indicators point to declining confidence among consumers and businesses. This could lead to increased volatility in financial markets and impact the odds of a rate cut by the Federal Reserve. Investors should stay informed about economic data releases and Fed decisions to make informed decisions about their finances.

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