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Australian Dollar Holds Losses Post RBA Decision

Australian Dollar Holds Losses

In our concise market analysis, the Australian dollar holds losses post-RBA decision and global market influences.
The Australian dollar faced initial losses following the Reserve Bank of Australia’s decision to maintain benchmark interest rates at 4.1%, in line with market expectations. The RBA acknowledged the need for potentially further tightening monetary policy due to persistently high inflation and a robust labor market. The central bank held its forecast for inflation to return to the 2-3% target range by late 2025, despite August’s Consumer Price Index rising to 5.2% year-on-year, well above the 2-3% target.

Additionally, there were indications of a possible improvement in China’s manufacturing sector, with factory activity expanding for the first time in six months in September. This development and other favorable indicators like retail sales and easing deflationary pressures in August hinted at a potential economic upturn in the world’s second-largest economy, which could benefit Australia.

Australian Dollar Holds Losses Post RBA Decision

Congress reached a last-minute agreement in the United States to avert a partial government shutdown, briefly supporting the Australian dollar. However, overall market sentiment remained cautious due to surging US yields driven by the expectation of prolonged higher rates. Federal Reserve Governor Michelle Bowman further supported this view, stating her willingness to back another increase in the central bank’s policy rate if inflation progress stalls or slows down.

Regarding technical analysis, AUD/USD has shown sideways movement in the past month, encountering resistance at 0.6525 and substantial support at 0.6350. AUD/USD must surpass the 0.6525 mark to mitigate immediate downside risks, potentially opening the path toward the 200-day moving average at approximately 0.6675. Conversely, a break below 0.6350 could expose downside risks, possibly leading to the October 2022 low of 0.6170.

Meanwhile, AUD/NZD has maintained a sideways trend for two months, attempting to breach the lower end of the range at the July low of 1.0720. Such a move could pave the way for a decline towards the May low of 1.0550, not far from the December low of 1.0470.

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