Australian Dollar moves around a major level with a negative bias

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• Australian Dollar could continue its downward trajectory.
• Australia’s central bank adopted a dovish stance in their recent meeting.
• US Dollar seems lukewarm, despite the positive tone of US bond yields.

The Australian Dollar (AUD) aims to continue a week-long slump while the US Dollar (USD) keeps weakening on Monday despite higher US Treasury yields. However, the AUD/USD pair feels the squeeze after the Reserve Bank of Australia (RBA) struck a dovish chord in their recent meeting.

Australia’s central bank issued its Monetary Policy Statement (MPS) on Friday, indicating the hurdles posed by stubborn inflation and a sluggish Australian economy. The RBA has its sights set on realigning inflation with its target. After careful consideration, the idea of hitting the pause button was on the table in November, but the RBA leaned towards the confidence of a rate hike as a more effective measure to tackle inflation concerns.

Federal Reserve (Fed) Chair Jerome Powell surprised in his speech on Thursday, taking a more hawkish stance than anticipated. Powell expressed concerns that the current policies might not be restrictive enough to reel inflation to the coveted 2.0% target. However, the market vibe suggests a widespread belief that the Fed has wrapped up its tightening cycle.

However, on Friday, the Greenback faces a challenge after the preliminary US Michigan Consumer Sentiment data for November showed a dip in the mood among consumers in the United States (US). It fell to 60.4 from 63.8 in the previous month.

Daily Digest Market Movers: Australian Dollar moves sideways, looks for fresh impetus

• RBA increased the Official Cash Rate (OCR) from 4.10% to a 12-year high of 4.35%, responding to the latest Monthly Consumer Price Index (YoY) for September, which indicated a notable increase of 5.6% compared to the expected 5.4% growth.
• Australia’s TD Securities Inflation (YoY) eased at 5.1% in September from 5.7% prior.
• Australia’s Retail Sales grew 0.2% in the third quarter after contracting by 0.6% in the previous quarter.
• Economists at the National Australia Bank (NAB) anticipate another 25 basis points hike in February following the Q4 inflation data. Additionally, NAB believes rate cuts will unlikely commence until November 2024.
• China’s Consumer Price Index (CPI) witnessed an annual decline of 0.2% in October, compared to the expected 0.1% decrease. The monthly CPI dropped by 0.1%, contrasting with the earlier 0.2% growth. A weaker economic scenario in China casts a shadow over the Aussie Dollar (AUD), given Australia’s heavy reliance on its largest trading partner.
• US weekly Initial Jobless Claims for the week ending November 4 totaled 217K, slightly below the market forecast of 218K and the previous week’s figure of 220K.

Technical Analysis: Australian Dollar hovers around 0.6350 with a negative tone

The Australian Dollar walks on a tightrope above the crucial support level of 0.6350 on Monday. A decisive break below might set the AUD/USD pair on a downward journey, eyeing the previous two-week low at 0.6314. On the flip side, the 14-day Exponential Moving Average (EMA) at 0.6387 poses as the initial resistance, followed by the 23.6% Fibonacci retracement at 0.6413, and the psychological hurdle at 0.6500.

AUD/USD: Daily Chart