The Australian Dollar (AUD) is facing downward pressure during the early European session on Thursday. The release of slower-than-anticipated Australian Q3 GDP figures, along with growing expectations of a dovish stance from the Reserve Bank of Australia (RBA), has led to selling in the currency. Concerns regarding potential tariffs on imports under the incoming administration of President-elect Donald Trump also contribute to the AUD’s decline.
Traders are closely watching the release of the US weekly Initial Jobless Claims and Goods Trade Balance later on Thursday. A softer reading in the US labour market data could potentially weaken the US Dollar and limit the AUD’s losses. However, the main focus remains on the US Nonfarm Payrolls (NFP) report for November, which is due on Friday.
The AUD’s Negative Trajectory Amid Data and Rate Cut Speculation
Australia’s trade surplus saw an increase to 5,953M on a month-on-month (MoM) basis in October from 4,532M (revised from 4,609M) in September, surpassing forecasts of 4,500M. However, the Gross Domestic Product (GDP) growth of 0.3% quarter-on-quarter (QoQ) in Q3, compared to 0.2% in Q2, fell short of the market consensus of 0.4%. The final reading of Australia’s Judo Bank Services PMI improved to 50.5 in November from 49.6 in October, exceeding the estimated value of 49.6.
In the US, the ISM Services PMI dropped to 52.1 in November from 56.0 in October, weaker than the expected 55.5. The US S&P Global Composite PMI declined to 54.9 in November compared to 55.3 previously. The Services PMI also fell to 56.1 in November from 57.0 in the prior reading, both figures coming in below estimations.
Fed Chair Jerome Powell stated on Wednesday that the US economy is stronger than expected in September when rate cuts began, suggesting that Fed officials may slow the pace of rate cuts. San Francisco Fed President Mary Daly also noted that the US central bank does not need to rush with rate cuts as more work is required to achieve 2% inflation and sustainable growth. According to the CME FedWatch Tool, the money markets have priced in a 77.5% chance of a quarter-point rate cut by the Fed in December and a 22.5% probability of the policy rate remaining unchanged.
For the AUD/USD pair, the bearish momentum is intact on the daily chart. The price is trading below the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The 14-day Relative Strength Index (RSI) is below the 50-midline at around 37.70, reinforcing the near-term downward trend.
If the bearish momentum persists below 0.6325, it could attract more sellers, potentially leading to a drop to 0.6285, the low of October 3, 2023. Further selling could see the pair reach the 0.6200 psychological mark. On the upside, a significant increase in buying above the upper boundary of the trend channel at 0.6512 could open the way to 0.6626, the 100-day EMA. Sustained trading above this level might lead to a rise to 0.6687, the high of November 7.
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