The Australian dollar's three consecutive declines are due to four main reasons. Could this be a bargain hunting opportunity?
2025-09-19 16:13:15
During Friday's European session, the Australian dollar rebounded from a low against the US dollar, falling to as low as 0.6587 before currently trading at 0.6601 (-0.15%), a 14-pip gain. Thursday's release of weekly US unemployment claims supported the US dollar, leading to the Australian dollar's decline. The Australian dollar's third consecutive day of decline is attributed to four key factors. Combined with the Reserve Bank of Australia's resolute rhetoric, this decline may present a bargain-hunting opportunity.
The Fed cut its federal funds rate by 25 basis points, its first rate cut of the year, and signaled another 50 basis point cut before the end of the year, slightly more than it forecast in June.
Federal Reserve Chairman Jerome Powell hinted that this was a hawkish rate cut. Signs of a weak labor market were becoming increasingly apparent, which was why officials decided to cut rates. However, declining inflation concerns and the Fed's optimism about future employment led to this rate cut being interpreted as a hawkish one. The latest Fed interest rate decision dot plot showed that even one Fed member believed that the 25 basis points cut in September should be added back in October.
The US dollar index, which measures the US dollar against six major currencies, continues to rise and is trading around 97.52 (0.17%) as of press time.
The U.S. Department of Labor reported Thursday that initial unemployment claims fell to 231,000 in the week ending September 13. This latest reading was lower than the initial estimate of 240,000 and lower than the revised 264,000 figure from the previous week (the original figure was 263,000). Meanwhile, continuing unemployment claims fell by 7,000 to 1.92 million in the week ending September 6, reducing the urgency for the Federal Reserve to continue cutting interest rates.
The Australian dollar was also weighed down by a weaker-than-expected jobs report released on September 18th, which showed a seasonally adjusted change of 5,400 jobs in August. July's figure was revised from 24,500 to 26,500, while the market expected an increase of 22,000. Meanwhile, the unemployment rate remained stable at 4.2% in August, as expected.
Australia is a core global exporter of commodities (iron ore, coal, natural gas, etc. account for more than 50% of its exports), and the Australian dollar exchange rate is highly positively correlated with commodity prices. Affected by the Federal Reserve's hawkish interest rate cuts, the market is concerned about whether the Federal Reserve will open the door to interest rate cuts in the future, causing an overall decline in commodity prices, dragging down the Australian dollar exchange rate.
It is worth noting that the Australian dollar may find support as the likelihood of further rate cuts by the Reserve Bank of Australia (RBA) decreases, as the market currently expects only a 20% chance of a September rate cut. Currently, the market expects only a 20% chance of a September rate cut and a 70% chance of a November rate cut. Policymakers remain cautious as inflation remains above target.
Sarah Hunt, Assistant Governor of the Reserve Bank of Australia (RBA), stated on Tuesday that the central bank is "close to achieving its inflation target." Hunt noted that risks to the outlook are balanced and emphasized the need for a forward-looking approach given the lag effects of monetary policy. She added that the RBA is closely monitoring the inherent dynamism of consumer spending and striving to maintain the economy near full employment.
Given that the less labor data in the United States in October is unlikely to overturn the judgment of a weak trend in the U.S. job market, commodities are recovering along with the backdrop of the global economy, and combined with the firm attitude of the Reserve Bank of Australia, it is speculated that the Australian dollar may be able to regain lost ground, and this may be a good opportunity to buy at the bottom.
The Australian dollar fell below the 9-day exponential moving average and fell to around the 0.6600 mark.
On Friday, the Australian dollar was trading around 0.6610 against the US dollar. Technical analysis on the daily chart shows that the pair remains within an ascending channel, reinforcing its bullish bias. However, short-term price momentum has weakened, with the price falling below the 9-day moving average moving average.
Initial support for the AUD/USD pair may be found at the middle line of the ascending channel, around 0.6595. A break below this channel will weaken the bullish bias and push the pair to test the 50-day EMA, which is around 0.6546.
On the upside, the AUD/USD exchange rate could target the 9-day exponential moving average, around 0.6622. A break above this level would improve short-term price momentum and could push the pair towards the 11-month high of 0.6706 set on September 17, before challenging the upper limit of the ascending channel, around 0.6710.
(AUD/USD daily chart, source: Yihuitong)
At 16:02 Beijing time, the Australian dollar was trading at 0.6599 against the US dollar.
The Fed's hawkish rate cuts are suppressing other currencies
The Fed cut its federal funds rate by 25 basis points, its first rate cut of the year, and signaled another 50 basis point cut before the end of the year, slightly more than it forecast in June.
Federal Reserve Chairman Jerome Powell hinted that this was a hawkish rate cut. Signs of a weak labor market were becoming increasingly apparent, which was why officials decided to cut rates. However, declining inflation concerns and the Fed's optimism about future employment led to this rate cut being interpreted as a hawkish one. The latest Fed interest rate decision dot plot showed that even one Fed member believed that the 25 basis points cut in September should be added back in October.
Dollar rises on weak jobless claims data
The US dollar index, which measures the US dollar against six major currencies, continues to rise and is trading around 97.52 (0.17%) as of press time.
The U.S. Department of Labor reported Thursday that initial unemployment claims fell to 231,000 in the week ending September 13. This latest reading was lower than the initial estimate of 240,000 and lower than the revised 264,000 figure from the previous week (the original figure was 263,000). Meanwhile, continuing unemployment claims fell by 7,000 to 1.92 million in the week ending September 6, reducing the urgency for the Federal Reserve to continue cutting interest rates.
Australian dollar dragged down by Australian jobs report
The Australian dollar was also weighed down by a weaker-than-expected jobs report released on September 18th, which showed a seasonally adjusted change of 5,400 jobs in August. July's figure was revised from 24,500 to 26,500, while the market expected an increase of 22,000. Meanwhile, the unemployment rate remained stable at 4.2% in August, as expected.
The Australian dollar is constrained by its commodity currency attributes
Australia is a core global exporter of commodities (iron ore, coal, natural gas, etc. account for more than 50% of its exports), and the Australian dollar exchange rate is highly positively correlated with commodity prices. Affected by the Federal Reserve's hawkish interest rate cuts, the market is concerned about whether the Federal Reserve will open the door to interest rate cuts in the future, causing an overall decline in commodity prices, dragging down the Australian dollar exchange rate.
Future Outlook:
It is worth noting that the Australian dollar may find support as the likelihood of further rate cuts by the Reserve Bank of Australia (RBA) decreases, as the market currently expects only a 20% chance of a September rate cut. Currently, the market expects only a 20% chance of a September rate cut and a 70% chance of a November rate cut. Policymakers remain cautious as inflation remains above target.
Sarah Hunt, Assistant Governor of the Reserve Bank of Australia (RBA), stated on Tuesday that the central bank is "close to achieving its inflation target." Hunt noted that risks to the outlook are balanced and emphasized the need for a forward-looking approach given the lag effects of monetary policy. She added that the RBA is closely monitoring the inherent dynamism of consumer spending and striving to maintain the economy near full employment.
Given that the less labor data in the United States in October is unlikely to overturn the judgment of a weak trend in the U.S. job market, commodities are recovering along with the backdrop of the global economy, and combined with the firm attitude of the Reserve Bank of Australia, it is speculated that the Australian dollar may be able to regain lost ground, and this may be a good opportunity to buy at the bottom.
Technical Analysis:
The Australian dollar fell below the 9-day exponential moving average and fell to around the 0.6600 mark.
On Friday, the Australian dollar was trading around 0.6610 against the US dollar. Technical analysis on the daily chart shows that the pair remains within an ascending channel, reinforcing its bullish bias. However, short-term price momentum has weakened, with the price falling below the 9-day moving average moving average.
Initial support for the AUD/USD pair may be found at the middle line of the ascending channel, around 0.6595. A break below this channel will weaken the bullish bias and push the pair to test the 50-day EMA, which is around 0.6546.
On the upside, the AUD/USD exchange rate could target the 9-day exponential moving average, around 0.6622. A break above this level would improve short-term price momentum and could push the pair towards the 11-month high of 0.6706 set on September 17, before challenging the upper limit of the ascending channel, around 0.6710.
(AUD/USD daily chart, source: Yihuitong)
At 16:02 Beijing time, the Australian dollar was trading at 0.6599 against the US dollar.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
