Global Factors Impact Australian Dollar

The Australian dollar experienced a slight decline, influenced by decisions made by the central banks of Australia. The Reserve Bank of Australia (RBA) maintained interest rates for the fourth consecutive month, adopting a less hawkish stance than anticipated.

Despite global financial market strains, the RBA asserted that Australia's economy is resilient, although it acknowledged heightened risks associated with a disorderly slide in asset prices or a slowdown in China. The RBA's semi-annual Financial Stability Review, the first under Governor Michele Bullock, highlighted that higher interest rates have strained households, causing financial stress. While the RBA has refrained from rate hikes in the past four months, it remains cautious about potential tightening if inflation persists. The review indicated that some borrowers are on the verge of financial stress, but overall stress is deemed manageable, given the robust capitalization of Australian banks.

The review emphasized offshore risks, with global financial conditions tightening, potentially leading to a disorderly decline in asset prices and economic growth. Concerns were raised about the impact of rising U.S. government bond yields on global markets, especially if inflation persists. The RBA warned that a tightening in global financial conditions could transmit to Australia through funding market linkages and increased risk aversion. Additionally, financial institutions, particularly in the United States, were identified as exposed to losses in commercial real estate, potentially affecting their lending capacity. The review also expressed concern about financial stress in China's property sector, a significant export market for Australia.

The broader financial landscape included a dip in the U.S. dollar on Friday, with market participants awaiting U.S. nonfarm payrolls data for potential market movement. Following its achievement of an 11-month peak earlier in the week, the dollar index is set to mark 12 successive weeks of advancements. U.S. labor market conditions remained tight, with a moderate rise in new claims for unemployment benefits and a decline in layoffs in September.

Data on the U.S. trade deficit in August indicated a significant narrowing, with exports of capital goods reaching a record high. Despite the Federal Reserve's interest rate increases to cool demand, the U.S. economy exhibited resilience. The shrinking trade deficit positioned trade to support economic growth in the third quarter, raising the risk of the Federal Reserve hiking rates again by year-end.

Amidst a broad selloff in world government bonds, the 30-year U.S. Treasury yield stabilized after briefly exceeding 5% earlier in the week. The stability came in the wake of resilient U.S. economic data reinforcing the Federal Reserve's commitment to higher-for-longer rates, leading to a surge in the U.S. dollar and Treasury yields. Consequently, it is anticipated that the Australian dollar will fluctuate within a limited range in the near term, although it may still face some long-term pressure.

Data for Technical Analysis (1H) CFD AUD/USD

Resistance : 0.6382, 0.6385, 0.6389

Support : 0.6372, 0.6369, 0.6365

1H Outlook  

Source: Investing.com

Buy/Long 1 If the support at the price range 0.6362 - 0.6372 is touched, but the support at 0.6372 cannot be broken, the TP may be set around 0.6384 and the SL around 0.6357, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6382 - 0.6392, TP may be set around 0.6400 and SL around 0.6367, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6382 - 0.6392 is touched, but the resistance at 0.6382 cannot be broken, the TP may be set around 0.6372 and the SL around 0.6397, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6362 - 0.6372, TP may be set around 0.6358 and SL around 0.6387, or up to the risk appetite.       

Pivot Points Oct 06, 2023 03:10AM GMT

Sources: Investing 1, Investing 2