AUD – The Australian dollar is consolidating, with focus on Tuesday's interest rate decision

The Australian dollar continued to be pressured against the U.S. dollar, hitting a low of 0.6531 on Friday, as markets lowered their expectations for a December rate cut by the Federal Reserve and the U.S. dollar strengthened. In Australia, data released last Wednesday showed that third-quarter consumer prices saw their biggest increase in over two years, driven by rising electricity bills and local government fees, while core inflation surged dramatically, somewhat eliminating the possibility of a rate cut. The Reserve Bank of Australia (RBA) will decide on interest rates this Tuesday. The market reflects that the likelihood of the RBA cutting its benchmark interest rate by 25 basis points from 3.60% on November 4th is virtually nonexistent. The Commonwealth Bank of Australia (CBA) believes the current easing cycle has ended, while the National Australia Bank (NAB) and ANZ expect another rate cut next year.

The Australian dollar broke through the 0.66 level against the US dollar again last Wednesday, after encountering resistance near this level for several days in early October. Last week's retest failed to break through, reaching a high of only 0.6617 before a correction ensued, falling back to around 0.6540 by Friday's close. Technical charts show that the RSI and Stochastic Oscillator have also turned downwards, suggesting further downward pressure on the Australian dollar in the short term. The first support level to test is the 100-day moving average, which has been a key indicator of the Australian dollar's direction in recent months; it is currently at 0.6535. More crucial levels to follow are the 200-day moving average at 0.6420 and the 0.64 level. The Australian dollar has managed to hold above this area for the past three months, so a break below these levels could trigger a larger downward wave. Further support levels are expected at 0.6370 and 0.6180. The resistance is estimated at 0.6560 and 0.6630, with the next level to be 0.67.

Forecast range:
Resistance: 0.6560 – 0.6630 – 0.6700
Support: 0.6535 - 0.6400/20* – 0.6370 – 0.6180

Key Focus:
Tuesday: Reserve Bank of Australia Interest Rate Decision (11:30 AM)

Thursday: Australia September Merchandise Trade Balance (8:30 AM)

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