The Australian Dollar (AUD) suffered devaluation for two consecutive days due to a strong US Dollar (USD), leaving investors on edge. Despite a general downtrend, the AUD found some support at the 0.7000 level. The USD experienced a boost from gains in Wall Street and positive job reports.
The decline in the AUD’s value could be a result of losses in Australia’s equity market, especially in the energy and consumer stocks sector. This had negative consequences for the ASX 200. The downside trend in Australia’s equity market overall could be a contributing factor to the AUD’s depreciation.
Proposed plans from the US Federal Reserve for three interest rate cuts in 2024 are set to pose future challenges for the AUD. The timeline remains undetermined, hinging on subsequent data publication.
Australian dollar’s downturn due to sturdy US dollar
The presumed cuts could result in critical currency value fluctuations, potentially affecting the AUD’s strength.
In positive news, Australia’s Employment Change for February exceeded expectations significantly with a 116.5K increase, surpassing the projected 40.0K. The country’s unemployment rate also dropped to 3.7%, doing better than the estimated 4.0%.
Remarks from US Federal Reserve Chair, Jerome Powell, have added to concerns, as they suggest an inclination towards a dovish tilt. This has brought about an atmosphere of uncertainty, creating added volatility in the foreign exchange market and contributing to a further decline in the AUD’s value. However, the resilience of the Australian economy remains, with the government taking measures to lessen the impact.
The AUD’s position is currently at 0.6540, initially supported by the 61.8% Fibonacci retracement level at 0.6528. However, if the AUD breaches this level, it may face a precarious situation with battles at the weekly low and significant 0.6500 value. This could lead to intensified struggles in maintaining its stability and potentially volatile fluctuations in its value against the USD.
Several factors such as final interest rates from Australia’s Reserve Bank (RBA), global risk sentiment, commodity prices, economic performance, inflation rates, employment figures, and political climate changes could significantly influence the AUD’s trajectory. Keeping a close eye on such aspects will be vital for accurately predicting potential AUD value fluctuations.
