05 Dec 2024

• The Australian Dollar softens in Thursday’s early European session.
• Slower-than-expected Australian Q3 GDP and heightened expectations of RBA's dovish stance exert some selling pressure on the Aussie. 
• The US weekly Initial Jobless Claims and Goods Trade Balance are due later on Thursday.
• The Australian Dollar (AUD) is experiencing downward pressure on Thursday. This decline is attributed to disappointing economic indicators from Australia and increasing speculation regarding an imminent interest rate reduction by the Reserve Bank of Australia (RBA). Furthermore, apprehensions regarding potential tariffs on imports under President-elect Donald Trump may also be influencing the AUD negatively.
  
  Market participants will be closely observing the US weekly Initial Jobless Claims and Goods Trade Balance on Thursday for new market direction. Any indications of a weakening labor market in the US could diminish the strength of the Greenback, potentially mitigating the losses of the AUD. On Friday, attention will shift to the US Nonfarm Payrolls (NFP) report for November.
  
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Australia's trade surplus rose to 5,953 million month-on-month in October, up from a revised figure of 4,532 million in September, surpassing the forecast of 4,500 million.

In the third quarter (Q3), Australia's Gross Domestic Product (GDP) experienced a growth of 0.3% quarter-on-quarter, an increase from the 0.2% growth recorded in the second quarter (Q2). However, this figure fell short of the market consensus, which anticipated a growth of 0.4%.

The final reading of Australia's Judo Bank Services PMI improved to 50.5 in November, up from 49.6 in October, exceeding the expected figure of 49.6.

In the United States, the ISM Services PMI decreased to 52.1 in November, down from 56.0 in October, which was below the anticipated 55.5.

The S&P Global Composite PMI in the US fell to 54.9 in November, compared to 55.3 previously. Additionally, the Services PMI declined to 56.1 in November from 57.0 in the prior reading, with both results coming in weaker than expected.

Federal Reserve Chair Jerome Powell stated on Wednesday that the current strength of the US economy exceeds the central bank's expectations from September, when it initiated interest rate reductions, suggesting that officials may consider a slower pace of rate cuts moving forward.

San Francisco Fed President Mary Daly remarked on Wednesday that there is no immediate need for the central bank to expedite rate cuts, emphasizing that the Fed still has significant work to do to achieve a 2% inflation target and sustainable growth.

According to the CME FedWatch Tool, the money markets indicate a nearly 77.5% probability that the Federal Reserve will implement a quarter-point rate cut in December, while there remains a 22.5% chance that the policy rate will remain unchanged.

AUD/USD’s bearish momentum on the daily chart remains intact

The Australian Dollar trades on a softer note on the day. The negative outlook of the AUD/USD pair remains in play, characterized by the price holding below the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The 14-day Relative Strength Index (RSI) stands below the 50-midline near 37.70, supporting the downward movement of the pair in the near term. 

Sustained bearish momentum below 0.6325 could draw in more sellers to 0.6285, the low of October 3, 2023. Any follow-through selling could see a drop to the 0.6200 psychological mark. 

On the upside, any follow-through buying above the upper boundary of the trend channel of 0.6512 could pave the way to 0.6626, the 100-day EMA. Sustained trading above the mentioned level could pave the way to 0.6687, the high of November 7.