The Australian Dollar Soars as the US Dollar Retreats
- The Australian Dollar appreciates as the US Dollar pulls back after hitting a two-year high of 108.07 on Friday.
- The S&P/ASX 200 Index rose to fresh all-time highs above 8,450, as Australian shares mirrored Wall Street’s momentum.
- President-elect Donald Trump has selected Scott Bessent, a seasoned Wall Street veteran and fiscal conservative, as the US Treasury Secretary.
The Australian Dollar (AUD) gains strength on Monday as the US Dollar (USD) continues its downward correction. This movement was partly influenced by bond market optimism following President-elect Donald Trump’s selection of fund manager Scott Bessent as the US Treasury secretary, a seasoned Wall Street figure and fiscal conservative.
The AUD also likely benefited from foreign inflows, driven by a surge in the domestic share market to fresh all-time highs. The S&P/ASX 200 Index climbed 0.63%, surpassing 8,450, as Australian shares mirrored Wall Street’s momentum. On Friday, the Dow Jones achieved another record-high close, contributing to the positive sentiment.
Additionally, the Australian Dollar received support from a hawkish stance by the Reserve Bank of Australia (RBA) on future interest rate decisions. Traders are now focused on Australia’s Monthly Consumer Price Index (CPI) for October, a crucial indicator for shaping expectations around domestic monetary policy.
Australian Dollar Rises as the US Dollar Corrects Downward
- The US Dollar Index (DXY) has eased to around 107.00 after hitting a two-year high of 108.07 on Friday.
- Futures traders are now assigning a 50.9% probability to the Federal Reserve cutting rates by a quarter point.
- The S&P Global US Composite PMI climbed to 55.3 in November, indicating the strongest growth in private sector activity since April 2022.
- The Judo Bank Australia PMI Composite Output Index dropped to 49.4 in November from 50.2 in October.
Key Takeaways:
- Australian banks are predicting the Reserve Bank of Australia’s first rate cut, signaling potential shifts in monetary policy.
- US Initial Jobless Claims dropped to 213,000 for the week ending November 15.
- The RBA remains vigilant about inflation, emphasizing the importance of maintaining a restrictive monetary policy.
- Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, citing the economy’s resilience.
Technical Analysis: Australian Dollar Outlook
The AUD/USD pair trades near 0.6540 on Monday, with technical analysis of the daily chart indicating strengthening short-term momentum. The pair has moved above the nine- and 14-day Exponential Moving Averages (EMAs), signaling a potential upward bias.
However, AUD/USD remains confined within a descending channel, suggesting the broader downtrend is still intact. Additionally, the 14-day Relative Strength Index (RSI) is slightly below the neutral 50 level.
On the downside, the AUD/USD pair may test immediate support at the nine-day EMA at 0.6520. A decisive break below this level could push the pair toward the lower boundary of the descending channel, near its yearly low of 0.6348.
Regarding its upside, the AUD/USD pair could aim for the upper boundary of the descending channel at 0.6570.
Australian Dollar FAQs
Get answers to common questions about the Australian Dollar:
- Factors influencing the Australian Dollar include interest rates, commodity prices, Chinese economy, and trade balance.
- The Reserve Bank of Australia (RBA) plays a crucial role in shaping the AUD through interest rate decisions.
- China’s economic health impacts the AUD due to its significant trade relationship with Australia.
- The price of Iron Ore, a major Australian export, can affect the value of the AUD.
- The Trade Balance, reflecting exports versus imports, can influence the strength of the Australian Dollar.