Aussie dollar weakens amid steady RBA policy and U.S. economic indicators

AUDUSD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.8%	-51.4 Pips
Week to-date	-1.92%	-125.1 Pips
December	-2%	-130.1 Pips

Upcoming key events (London Time)

Wed 01:30 PM USD CPI Inflation Rate (12-mth)
Thu 12:30 AM AUD Labour Force Monthly Employment Change
Thu 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)

What happened lately

In the United States, the Bureau of Labor Statistics reported a decline in Unit Labor Costs during the third quarter, easing to 0.8% from the previous quarter’s 1.9%. This deceleration could suggest a softening pressure on wages and associated costs for businesses, contributing to a less inflationary environment. Meanwhile, the Nonfarm Business Labor Productivity in the U.S. remained steady at 2.2% for the third quarter, indicating consistent productivity levels compared to the second quarter. Stability in productivity amid slowing labor costs may positively influence the business sector by helping maintain profit margins, which could indirectly affect monetary policy considerations.

In Australia, the Reserve Bank of Australia decided to keep the Cash Rate Target unchanged at 4.35%. This decision reflects a continuation of the current monetary policy stance, likely aimed at fostering economic stability amidst global uncertainties. The steady interest rate could be indicative of the RBA’s attempt to balance inflation management with economic growth support. Such a decision can impact the Australian dollar by providing a signal to markets that the central bank is currently not leaning towards further tightening or easing of monetary policy.

Regarding the AUDUSD currency pair, the news of a steady monetary policy in Australia, coupled with the dollar-friendly labor costs and productivity reports from the U.S., contributes to a bearish sentiment for the Australian dollar against the U.S. dollar. The AUDUSD dropped by 0.8% to 0.63773, reflecting stronger performance prospects for the U.S. economy amidst stable productivity and decreasing labor costs. Investors might perceive these signals as supportive for the U.S. dollar, expecting it to benefit from the relatively resilient economic indicators. Potential upcoming U.S. inflation-related releases could further influence this currency pair by impacting the Federal Reserve’s monetary policy path, while the same holds true for Australian employment figures, which could sway market expectations about the future direction of RBA policy decisions.

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What can we expect from AUDUSD today?

AUDUSD on Tuesday dropped -0.8% to 0.63773. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for AUDUSD looks bearish as the pair posted lower in Tuesday trading session.

Looking ahead for the day, immediate support level is at S1 0.63487 with break below could see further selling pressure towards S2 at 0.632. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.64382 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.63648 would indicate selling pressure.

For the week to-date, take note that AUDUSD is bearish as the pair posted lower by -1.92%.

Key levels to watch out:

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