The Australian Dollar (AUD) is holding near three-month lows against the US Dollar (USD) on Friday, following a recent downward trend driven by disappointing domestic economic data. Despite a strong Retail Sales report from China, the AUD remained largely unaffected by mixed economic data from its major trading partner.
China’s Retail Sales surged by 4.8% year-over-year in October, exceeding expectations of 3.8%, while Industrial Production grew by 5.3% YoY, slightly missing forecasts of 5.6%. Although the data suggests resilience in China’s consumer sector, concerns over its industrial performance lingered. The National Bureau of Statistics (NBS) indicated that China’s consumer outlook improved in October, with plans for intensified policy adjustments to boost domestic demand.
Meanwhile, Australia’s economic data painted a mixed picture. The country’s seasonally adjusted unemployment rate held steady at 4.1% in October, meeting expectations. However, employment growth fell short, with only 15.9K new jobs added, compared to the anticipated 25.0K. The sharpest decline came in Australia’s Consumer Inflation Expectations, which fell to 3.8% in November, marking the lowest level since October 2021.
In a more positive development, Reserve Bank of Australia (RBA) Governor Michele Bullock’s remarks on Thursday suggested that current interest rates are sufficiently restrictive, signaling a less dovish stance from the RBA. This could offer some support to the AUD in the near term, counterbalancing the bearish pressures from other factors.
The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, has pulled back slightly from its yearly high of 107.06 reached on Thursday, trading near 106.80. The recent correction in the USD comes amid comments from Fed Chair Jerome Powell, who noted that the US economy’s strong performance gives the Federal Reserve room to ease interest rates gradually. This shift in market expectations has weighed on the USD, offering some relief to the AUD.
The markets are now focusing on key US economic data, including October Retail Sales and Industrial Production, due later today. Comments from Federal Reserve officials could provide further guidance on the future pace of rate cuts, influencing the outlook for the USD and, by extension, the AUD.
Technical Analysis: AUD/USD Faces Short-Term Downward Pressure
AUD/USD is trading near 0.6460 on Friday, reflecting ongoing downward pressure. The pair remains below the nine-day Exponential Moving Average (EMA), indicating short-term bearish momentum. The 14-day Relative Strength Index (RSI) is slightly above 30, suggesting that the pair is approaching oversold conditions, which could prompt a potential upward correction if the RSI dips below 30.
Immediate support is seen at the psychological level of 0.6400. A break below this level could drive the pair towards its yearly low of 0.6348, last touched on August 5. On the upside, resistance lies at the 0.6500 level. A breakout above this could lift the pair towards the nine-day EMA at 0.6525, with further gains targeting the 14-day EMA at 0.6553. A move beyond these levels could open the way for a push toward the three-week high of 0.6687.
In summary, while the AUD remains under pressure due to weaker domestic data and ongoing concerns over China’s economic slowdown, less dovish rhetoric from the RBA may limit the downside. The pair’s technical indicators suggest a potential for a short-term bounce if it reaches oversold territory, though the overall trend remains bearish.
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