• Sun. Jul 14th, 2024

The Australian Dollar Ends the Week Weak as Markets Wait for the RBA’s Decision

Leon Kramer

ByLeon Kramer

Jun 15, 2024
The Australian Dollar Ends the Week Weak as Markets Wait for the RBA’s Decision

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  • The AUD/USD pair is experiencing a downward trend as investors prepare for the upcoming decision by the Reserve Bank of Australia (RBA).
  • The Federal Reserve’s forecast of increased interest rates is further strengthening the USD.
  • The Australian calendar was devoid of any significant events on Friday, while the USD experienced only minor intraday declines due to the release of soft UoM figures.

The Australian Dollar (AUD) experienced further declines in comparison to the United States Dollar (USD) despite the fact that Australia had released positive labor market data earlier in the week. This resulted in the Reserve Bank of Australia (RBA) adopting a more optimistic stance.

Due to changes in interest rates, the United States of America is gaining popularity. Officials from the Federal Reserve (Fed) have predicted that there will be fewer rate reductions this year. In addition, the Greenback has maintained its robustness in spite of the unimpressive data that was released by the University of Michigan (UoM) during the European session.

Indicators of fragility have been observed in the Australian economy; however, the Reserve Bank of Australia (RBA) is delaying reductions due to the persistently high inflation rate, which may potentially limit the economy’s ability to decline.

Investors are eager to gather additional insights and indications, and the upcoming meeting of the Reserve Bank of Australia (RBA) on the following Tuesday has captured their attention. At the moment, the markets are considering the possibility of a reduction in interest rates; however, it is anticipated that this will take place in May 2025. Nevertheless, there is a greater possibility of beginning earlier than expected.

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As Markets Analyze UoM Numbers From the United States, the Australian Dollar Continues Its Downward Trend

  • There were no notable developments in the Australian economy on Friday.
  • In the United States, consumer confidence took a hit as the Consumer Sentiment Index from the University of Michigan dropped to 65.6 in June, down from 69.1 in May. This reading fell short of the market’s anticipated level of 72.
  • The Current Conditions Index dropped to 62.5 from 69.6, while the Consumer Expectations Index decreased to 67.6 from 68.8.
  • According to the survey findings, the anticipated inflation rate for the next year remained consistent at 3.3%, while the projected inflation rate for the next five years increased to 3.1% from 3%.
  • Earlier this week, the Employment data for May exceeded expectations, leading to speculation that the Reserve Bank of Australia (RBA) would keep its Official Cash Rate unchanged for the rest of the year.
  • Furthermore, the Australian Unemployment Rate dropped to 4.0% as anticipated, down from 4.1% in April.
  • Market expectations for rate cuts have consistently clashed with the Federal Reserve’s projections for rate cuts through 2024. According to the CME’s FedWatch Tool, rate markets are currently indicating a greater than 60% chance of a 25 basis-point rate reduction on September 18.

Sellers of AUD/USD Keep Going, and the Picture Gets Worse

The Relative Strength Index (RSI) currently rests below 50 and is trending downwards, suggesting a bearish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) shows a consistent pattern of increasing red bars, indicating a continuous presence of selling pressure.

The immediate forecast has become pessimistic as the pair dropped below the 20-day Simple Moving Average (SMA) towards 0.6613, suggesting a decrease in purchasing momentum. If this pattern persists, the 100 and 200-day Simple Moving Averages (SMAs) may act as possible obstacles near the 0.6560 region.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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