The Australian Dollar (AUD) saw a second day of gains against the US Dollar (USD) as the USD weakened following labour data and inflation prints. This pushed AUD/USD higher towards the 0.6700 level on Thursday. The recent strength in the AUD was also supported by positive monetary policy developments from the Reserve Bank of Australia (RBA).
Despite occasional strength in the Greenback and concerns about China’s economic outlook, the AUD managed to maintain its positive outlook, supported by the 200-day SMA at 0.6617. However, continued weakness in iron ore prices, a key commodity for Australia, could limit further gains for the AUD due to its close ties to China’s economic performance.
The RBA has taken a cautious stance on monetary policy, holding the Official Cash Rate (OCR) at 4.35% amid inflationary pressures. The recent RBA Minutes indicated a hawkish tone, with discussions about potentially raising the cash rate target. However, market expectations still show a high probability of a rate cut by the end of the year.
Looking ahead, with the Fed expected to implement rate cuts and the RBA likely to maintain a restrictive policy stance, AUD/USD could see further gains. However, challenges remain with China’s slow economic recovery and lack of significant stimulus measures.
In terms of data, Consumer Inflation Expectations eased slightly in September. Technical analysis suggests further gains for AUD/USD towards key resistance levels, but sellers could push the pair lower towards support levels.
Analysis:
The recent strength in the Australian Dollar against the US Dollar was driven by a weakened USD following labour data and inflation prints. Positive monetary policy developments from the RBA also supported the AUD’s outlook. However, challenges remain with China’s slow economic recovery and potential rate cuts by the RBA. Overall, AUD/USD could see further gains in the near term, but the outlook remains cautious due to external factors affecting the Australian economy.