25 Nov 2024

• The Australian Dollar appreciates as the US Dollar pulls back after hitting a two-year high of 108.07 on Friday.
• The S&P/ASX 200 Index rose to fresh all-time highs above 8,450, as Australian shares mirrored Wall Street's momentum.
• President-elect Donald Trump has selected Scott Bessent, a seasoned Wall Street veteran and fiscal conservative, as the US Treasury Secretary.
• The Australian Dollar (AUD) experienced an increase in value on Monday as the US Dollar (USD) continued its trend of decline. This shift was partially driven by optimism in the bond market following President-elect Donald Trump's appointment of fund manager Scott Bessent as the US Treasury Secretary, a well-regarded figure on Wall Street known for his fiscal conservatism.
  
  Moreover, the AUD likely gained from foreign investments, spurred by a notable rise in the domestic equity market, which reached new all-time highs. The S&P/ASX 200 Index rose by 0.63%, exceeding 8,450, as Australian stocks reflected the positive momentum seen on Wall Street. On Friday, the Dow Jones recorded another record-high close, further enhancing market sentiment.
  
  In addition, the Australian Dollar found support from a hawkish outlook from the Reserve Bank of Australia (RBA) regarding future interest rate policies. Market participants are now keenly awaiting Australia’s Monthly Consumer Price Index (CPI) for October, a vital metric for influencing expectations surrounding domestic monetary policy.
  
  The RBA, in its most recent meeting minutes, indicated that interest rates would remain tight until there is definitive evidence of inflation sustainably returning to its target. However, the central bank also noted that any future policy changes would be contingent on incoming data, highlighting the significance of forthcoming economic reports.

• Australian Dollar rises as the US Dollar corrects downward after hitting two-year highs

• The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, has eased to around 107.00 after hitting a two-year high of 108.07 on Friday. However, downside risks for the USD remain limited, as recent as robust preliminary S&P Global US Purchasing Managers’ Index (PMI) data has strengthened expectations that the Federal Reserve (Fed) may slow the pace of rate cuts.
• Futures traders are now assigning a 50.9% probability to the Federal Reserve cutting rates by a quarter point, down from approximately 61.9% a week earlier, according to the CME FedWatch Tool. Meanwhile, Treasury yields remain buoyed by expectations that President-elect Donald Trump’s proposed policies on tariffs, immigration, and taxes could spur inflation and constrain the Fed’s capacity to reduce borrowing costs further.
• The S&P Global US Composite PMI climbed to 55.3 in November, indicating the strongest growth in private sector activity since April 2022. The US Services PMI surged to 57.0, up from 55.0 in October and significantly exceeding market expectations of 55.2, marking the sharpest expansion in the services sector since March 2022. Meanwhile, the US Manufacturing PMI increased to 48.8 from 48.5 in October, aligning with market forecasts.
• The Judo Bank Australia PMI Composite Output Index dropped to 49.4 in November from 50.2 in October, indicating a modest contraction in private sector output for the second time in three months. Manufacturing PMI rose to 49.4 in November from 47.3 in October, marking its 10th consecutive month of contraction. Meanwhile, the Services PMI fell to 49.6 from 51.0, signaling the first contraction in services activity in ten months.
• Australia's four largest banks are predicting the Reserve Bank of Australia's first rate cut. Westpac has revised its forecast for the first cut to May, up from February. National Australia Bank (NAB) also expects the cut in May. Meanwhile, Commonwealth Bank of Australia (CBA) and ANZ are both cautiously forecasting a rate cut in February.
• US Initial Jobless Claims dropped to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the expected 220,000.
• The Reserve Bank of Australia's November Meeting Minutes indicated that the central bank’s board remains vigilant about the potential for further inflation, stressing the importance of maintaining a restrictive monetary policy. Although board members noted no "immediate need" to alter the cash rate, they kept options open for future adjustments, emphasizing that all possibilities remain on the table.
• Federal Reserve Bank of Chicago President Austan Goolsbee made headlines on Thursday, stating that inflation is steadily approaching the 2% target. Goolsbee also noted that the labor market is nearing stability and full employment. Looking ahead, he anticipates interest rates could drop significantly from their current levels over the next year.
• Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to hurry to lower rates."

• Technical Analysis: Australian Dollar breaks above the nine-day EMA to near 0.6550

  The AUD/USD pair is currently trading around 0.6540 on Monday, with technical analysis of the daily chart suggesting a strengthening of short-term momentum. The pair has surpassed the nine- and 14-day Exponential Moving Averages (EMAs), indicating a possible upward trend.
  
  Nevertheless, the AUD/USD remains trapped within a descending channel, which implies that the overall downtrend is still in effect. Furthermore, the 14-day Relative Strength Index (RSI) is marginally below the neutral 50 level. A significant breakout above the 50 threshold would offer a clearer indication of a potential directional change, possibly confirming bullish momentum.
  
  On the downside, the AUD/USD pair may encounter immediate support at the nine-day EMA, positioned at 0.6520. A decisive breach below this level could lead the pair towards the lower boundary of the descending channel, close to its yearly low of 0.6348, which was last reached on August 5.
  
  In terms of potential gains, the AUD/USD pair could target the upper boundary of the descending channel at 0.6570. A breakout above this resistance level could indicate a shift in momentum, potentially paving the way for a rally towards the four-week high of 0.6687.