- The US Dollar Index has retreated from its yearly high, helping to limit the Australian Dollar’s decline.
- Weak Australian jobs data pushes the pair lower on Friday.
- Hardline bets on the RBA could also help the Australian dollar.
The AUD/USD pair rose 0.20% to 0.6460 in Friday’s session. The Australian Dollar managed to recover as the US Dollar Index (DXY) retreated from its yearly highs. However, the Australian Dollar could face challenges due to recent weak domestic and Chinese economic data. On the positive side, Reserve Bank of Australia (RBA) Governor Bullock stated that current interest rates will remain unchanged until the bank gains confidence in the inflation outlook.
Weak Australian jobs data, released on Friday, revealed a loss of 8,100 jobs during October, raising concerns about the strength of the Australian economy. This, coupled with disappointing Chinese data, could limit the Australian Dollar’s recovery in the near term. Despite these headwinds, recent hawkish comments from RBA Governor Bullock, who hinted at the possibility of further rate hikes to control inflation, could provide some support for the Australian dollar.
Daily Market Summary: Australian Dollar Rebounds on Weaker US Dollar Index Following Retail Sales
- AUD bounces against USD on Friday.
- USD weakens despite better-than-expected US retail sales data ahead of crucial holiday shopping season.
- US retail sales rose 0.4% in October, beating expectations and September growth.
- The control group of retail sales contracted 0.1%, while excluding autos, sales grew 0.1% mom, below consensus.
- Investors reduce bets on another Fed interest rate cut in December due to Powell’s comments.
- Markets price a 25 basis point rate cut from the RBA only in May 2025, which diverges with market bets on the Fed, which could eventually help the Australian dollar.
AUD/USD Technical Outlook: Pair Sees Some Light, But Outlook Remains Negative
Although the brief recovery towards 0.6460 provided temporary respite, the AUD/USD pair remains firmly within a downtrend. Key technical indicators such as the Relative Strength Index (RSI) and Moving Average Convergence/Divergence (MACD) remain in bearish territory, highlighting the dominance of selling pressure. This technical outlook implies that the corrective bounce will likely be short-lived, with the path of least resistance remaining to the downside.
The Australian Dollar FAQs
One of the most important factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as is inflation in Australia, its growth rate and the Balance of Trade. Market sentiment, that is, whether investors bet on riskier assets (risk-on) or seek safe havens (risk-off), is also a factor, with the risk-on being positive for the AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The RBA’s main objective is to maintain a stable inflation rate of 2%-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low ones. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being negative for the AUD and the latter being positive for the AUD.
China is Australia’s largest trading partner, so the health of the Chinese economy greatly influences the value of the Australian Dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, which increases demand for the AUD and drives up its value. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian Dollar.
Iron ore is Australia’s largest export, with $118 billion a year according to 2021 data, with China being its main destination. The iron ore price, therefore, may be a driver of the Australian dollar. Typically, if the price of iron ore rises, the AUD also rises as aggregate demand for the currency increases. The opposite occurs when the price of iron ore falls. Higher iron ore prices also tend to result in a higher likelihood of a positive trade balance for Australia, which is also positive for the AUD.
The trade balance, which is the difference between what a country earns from its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly sought-after exports, its currency will gain value solely from the excess demand created by foreign buyers wanting to purchase its exports versus what it spends on purchasing imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the trade balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
