Businesses in Australia can still grow to some extent.

The Australian dollar has slightly weakened due to China, a significant trading partner for Australia, experiencing a significant decline in trade data. There are expectations that the United States Federal Reserve (FED) will continue its tight monetary policy, despite signs of economic flexibility emerging in the US. If the FED maintains this monetary policy, it could exert pressure on currencies worldwide.

In its latest policy meeting, the Reserve Bank of Australia (RBA) has hinted at future interest rate increases. The RBA has extended the timeframe for achieving its inflation target, aiming for inflation rates to return to the 2-3% range by the end of 2023. Additionally, the RBA has revised down its economic growth forecast to 0.9% for the current year from the previous estimate of 1.2%. The central bank has kept its policy interest rate at 4.1% in the August meeting.

Although the Australian dollar has experienced depreciation, reports from the central bank indicate an improvement in Australia's business confidence index, reaching 2 in July, compared to a previous adjustment to -1. This suggests a consistent economic recovery for Australia, albeit not exceptionally rapid. The RBA's swift interest rate hikes in recent times have also contributed to an increase in labor costs.

The Consumer Confidence Index in Australia has decreased by 0.4% on a monthly basis, standing at 81.0 in the latest announcement, compared to a 2.7% increase in the previous month. Despite the Reserve Bank of Australia (RBA) maintaining the interest rate at 4.1% in the previous month, it barely alleviates concerns about the impact of rising borrowing costs due to the interest rate hike, which would have repercussions on spending in other sectors as well.

The higher borrowing costs have led to a reduction in new home purchases, with new home loans decreasing by 2.8% on a monthly basis, totaling AUD 15.91 billion. This marks the fourth contraction in this year and the most significant decline since December. Although housing construction numbers have increased, this trend has not been sufficient to counterbalance the effects.

Australia's 10-year government bond yields have dropped below 4% once again, after briefly surpassing 4.2% in the past week. This decline mirrors the global trend of falling bond yields, as investors assess the economic outlook and interest rate trajectory in the United States. The easing of inflationary pressures has prompted speculation that the rate hike cycle might be coming to an end. Investors are anticipating a further 25 basis points increase in interest rates in the upcoming RBA meeting.

Techical analysis data (5H)

Resistance: 1.5317, 1.5340, 1.5359

Support: 1.5275, 1.5256, 1.5233

Source: Investing.com