Australian Dollar recovers losses amid stronger US Dollar, awaits Fedspeak

  • The Australian Dollar recovers intraday losses as Iranian media denies any foreign attack on its cities.
  • Australia’s equity market falls to a two-month low of 7,489 on Friday.
  • The US Dollar gained ground after hawkish remarks from Fed officials made on Thursday.

The Australian Dollar (AUD) remains in the negative territory after paring losses on Friday. The AUD/USD pair dropped as riskier assets faced pressure due to heightened risk aversion across financial markets. This sentiment intensified following confirmation from ABC News that Israeli missiles had struck a site in Iran, exacerbating tensions in the Middle East.

The Australian Dollar (AUD) faces challenges alongside a decline in the ASX 200 Index on Friday, nearing its two-month low of 7,489. This trend was influenced by weak cues from Wall Street overnight. Additionally, Australia’s 10-year government bond yield fell below 4.3%, retracting from over four-month highs, as investors anticipated a dovish outlook from the Reserve Bank of Australia (RBA) regarding monetary policy.

The US Dollar Index (DXY), which measures the US Dollar (USD) against six major currencies, advances amid heightened concerns over the potential escalation of the Israel-Gaza conflict in the Middle East. This has attracted investors seeking safe-haven assets. Furthermore, hawkish remarks from Federal Reserve (Fed) officials on Thursday triggered a surge in US Treasury yields and the US Dollar, subsequently exerting downward pressure on the AUD/USD pair.

Traders are expected to closely monitor upcoming speeches from Federal Reserve officials. Atlanta Fed President Raphael Bostic is set to partake in a moderated discussion regarding the US economic outlook at the University of Miami, Florida. Additionally, Chicago Fed President Austan Goolsbee is anticipated to participate in a moderated Q&A session at the Association for Business Journalists 2024 SABEW Annual Conference in Chicago.

Daily Digest Market Movers: Australian Dollar depreciates on risk aversion, dovish RBA’s outlook

  • According to Reuters, citing Iran’s Fars News Agency, locals reported hearing explosions at the central Isfahan airport. However, the cause of these explosions remains unknown. However, Iranian media has refuted reports of a foreign attack on Iranian cities, including Isfahan.
  • Atlanta Fed President Raphael Bostic highlighted that US inflation is excessively high and emphasized that the Fed still needs to make progress on addressing inflation. Meanwhile, New York Fed President John Williams stressed the Fed’s commitment to being data-dependent and expressed that he does not currently perceive an immediate need to lower interest rates.
  • US Initial Jobless Claims reported a figure of 212,000 for the week ending on April 12, compared to the expected 215,000.
  • US Philadelphia Fed Manufacturing Survey showed an improvement in the manufacturing sector trends with a higher reading of 15.5 for April, exceeding the expected 1.5 and 3.2 prior.
  • US Existing Home Sales Change (MoM) reduced by 4.3% in March, swinging from the previous increase of 9.5%.
  • Australia’s Employment Change posted a reading of -6.6K for March, against the expected 7.2K and 117.6K prior. Unemployment Rate rose to 3.8% in March, lower than the expected 3.9% but higher than the previous reading of 3.7%.

Technical Analysis: Australian Dollar falls below the psychological level of 0.6400

The Australian Dollar trades around 0.6390 on Friday. The latest break below the descending channel on the daily chart denotes a strengthening of the bearish bias. Additionally, the 14-day Relative Strength Index (RSI) suggests a bearish sentiment for the AUD/USD pair as it remains below the 50 level. Notable support is identified at the major level of 0.6350, following the psychological level of 0.6300. On the upside, immediate resistance for the AUD/USD pair is anticipated at the psychological level of 0.6400. A breakthrough above the latte could lead the pair to explore the region around the major level of 0.6450 and the nine-day Exponential Moving Average (EMA) at 0.6455.

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