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The Reserve Bank of Australia capitulates easing in response to expectations of a US dollar interest rate cut? The Australian dollar suffered a double blow!
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market xmspot.commentary]: The Reserve Bank of Australia's capitulation-style easing, in the face of expectations of US dollar interest rate cuts? The Australian dollar suffered a double blow!". Hope this helps you! The original content is as follows:
The Australian dollar fell against the US dollar during the Asian market on Tuesday (October 14). After the Reserve Bank of Australia released the minutes of its September monetary policy meeting, the Australian dollar did not receive a boost. Instead, market caution provided support for the US dollar. The minutes showed that council members agreed that the current policy is still slightly tight, but it is difficult to accurately assess the degree of tightening.
The minutes of the meeting also pointed out that economic risks still exist, and consumption continues to be weak against the backdrop of slowing employment and wage growth. But monthly CPI data for the housing and services sectors suggested inflation in the third quarter may be higher than expected.
Market sentiment remained cautious last week after RBA Chairman Michelle Bullock emphasized that service sector inflation remains sticky. She acknowledged that inflation in the second quarter was slightly higher than expected, but emphasized that inflation is continuing to fall in the right direction.
Australia’s October consumer inflation expectations rose to 4.8% from the previous 4.7%, the highest level since June. Concerns that inflation may exceed expectations in the third quarter have intensified, reinforcing expectations that the Reserve Bank of Australia will maintain a cautious policy stance.
The market generally expects that the Reserve Bank of Australia will continue to remain on hold after keeping the official cash rate unchanged at 3.6% in September.
The U.S. dollar is stable before Fed Chairman Powell’s speech
The U.S. dollar index is currently stable, trading around 99.20. Markets are closely watching Federal Reserve Chairman Jerome Powell's speech later today.
According to the CMEFedWatch tool, the market currently predicts that the probability of the Federal Reserve cutting interest rates in October is as high as 97%, and the probability of another interest rate cut in December is 92%.
Philadelphia Fed President Anna Paulson ZhouOne said rising risks to the job market support further interest rate cuts by the Federal Reserve, as tariffs now appear unlikely to push up inflation as expected.
The minutes of the September Federal Open Market xmspot.committee meeting showed that policymakers are leaning towards further cuts in interest rates this year. Most policymakers support a rate cut in September and have signaled further easing later this year. However, some members advocated a more cautious approach, citing concerns about inflation.
U.S. President Trump said on Friday that there was no need to meet with Chinese leaders at the summit in South Korea in two weeks and announced plans to impose 100% tariffs on Chinese imports. But on Sunday, he made moderate remarks on the TruthSocial platform, saying that China's economy "will get better" and that the United States wants to "help China rather than hurt China."
Leaked briefings from the Australian Prime Minister's Department show that government officials have begun discussions with miners to jointly establish a "critical mineral strategic reserve" of 1.2 billion Australian dollars (776.28 million U.S. dollars). Australia is considering setting minimum prices for critical minerals and providing financial support for new rare earths projects under a proposed U.S.-Australia resources deal.
Technical Analysis
Daily chart technical analysis shows that as the AUD/USD continues to move lower within the descending channel, the overall trend remains bearish.
The 14-day relative strength index (RSI) remains below the 50 neutral line, reinforcing the bearish outlook.
On the downside, the Australian dollar against the US dollar may test the lower track of the descending channel near 0.6460. An effective break below the channel's lower rail would consolidate the bearish trend and push the pair to test the four-month low of 0.6414 set on August 21, and then to the five-month low of 0.6372.
On the upside, initial resistance is seen at the 9-day exponential moving average at 0.6542, followed by the 50-day exponential moving average at 0.6555. Breaking through these moving average resistances will improve short- to medium-term price momentum and push AUD/USD to test the upper track of the descending channel near 0.6600. If there is a further break above the upper rail of the channel, a bullish trend will begin to emerge, supporting the exchange rate to test the 12-month high of 0.6707 set on September 17.
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