AUD/USD Price Analysis – Oct 03, 2023

Daily Price Outlook

During the early European session on Tuesday, the AUD/USD currency pair continued its bearish trend, failing to find support as it remained firmly below the mid-0.6300s. It is trading at 0.6313, showing a marginal 0.78% loss for the day. However, the decline in its value can be attributed to the Federal Reserve's adoption of a more hawkish stance, the upward trajectory of US bond yields, and the persistent strength of the US dollar.

Furthermore, the market participants seems cautious to place any strong position as they await the Reserve Bank of Australia (RBA) to reveal its monetary policy decisions.

US Manufacturing Data and Federal Reserve Comments Impacting AUD/USD

It's important to mention that the US ISM Manufacturing PMI for September came in at 49.0, up from the previous reading of 47.6. This was slightly higher than the expected 47.7 but still indicates that the US manufacturing sector is shrinking. In more detail, the Prices Paid Index dropped from 48.4 to 43.8, showing a decrease in prices paid by manufacturers.

On the positive side, the Employment Index increased from 48.4 to 51.2, indicating some improvement in job prospects. Furthermore, the New Orders Index went up from 46.8 to 49.2, suggesting a slight increase in new orders.

On another note, Federal Reserve Governor Michelle Bowman mentioned that it is likely they'll raise interest rates and keep them high for a while. On the other hand, Fed Vice Chair for Supervision Michael Barr has taken a more cautious stance, emphasizing the importance of how long interest rates will remain high. Barr believes that they can control rising prices without negatively impacting job opportunities.

Therefore, the AUD/USD currency pair may face some additional pressure as the stronger US data and hints of higher interest rates could boost the US dollar's attractiveness relative to the Australian dollar.

Economic Outlook and Key Events in Australia and the US

In Australia, the Reserve Bank is expected to keep interest rates steady at 4.1% during Michele Bullock's first meeting as governor. Market watchers will pay close attention to the RBA's statement, especially for any hints about potential future rate hikes, which could help support the Australian dollar against the US dollar.

Looking ahead, traders will be closely monitoring the RBA's interest rate decision on Tuesday. In the US, the focus will shift to employment data, with the ADP report coming on Wednesday and Nonfarm Payrolls on Friday. These reports can influence the currency market dynamics.

AUD/USD - Technical Analysis

The AUD/USD pair decisively penetrated the 0.6400 mark, approaching the anticipated initial bearish target of 0.6330. Market projections suggest further downward momentum, with subsequent targets at 0.6270 and then 0.6200.

In the foreseeable future, the bearish outlook is poised to prevail, underscored by its position beneath the EMA50. It's pivotal to note that any sustained breach above 0.6400 could halt this decline, ushering in potential recovery efforts. For today's trading landscape, the AUD/USD is projected to fluctuate between a support level of 0.6280 and a resistance point of 0.6380.