AUD/USD Holds Range Amid Data and Fed Caution

AUD/USD traded near 0.6590[1] in Tuesday's trading session, continuing its recent drop after Australia reported weaker business activity figures. The primary reason behind this move is believed to have been a slumping performance in Australia S&P Global Composite PMI[2] which fell to 52.1, its lowest in three months and an indicator that growth in major sectors is decelerating. Market reports point out that both manufacturing and services registered slower gains and hence traders were more hesitant on the performance of the Australian Dollar.

Market commentators[3] believe that to deepen the pressure, the US Dollar has remained strong. Market reports[4] point out that the recent remarks of the US Federal Reserve officials have made the Dollar remain stable despite a 25 basis point reduction in interest rates by the Fed last week. Market observers[5] note that the policymakers remain cautious of the inflation and employment statistics in the US and this factor has contributed to the increase of the Dollar Index and kept the Aussie Dollar down versus the greenback.

Analysts[6] anticipate that the AUD/USD exchange rate would not be able to appreciate in the future unless the Australian economic figures improve or the US Federal Reserve becomes significantly friendlier to riskier currencies. Market reports[7] note that currently, the pair is supported at 0.6550, which is nearest to its 50 days moving average, and may even fall further to test the August low of 0.6414 provided that the selling persists. Conversely, the first significant opposition is at 0.6611. Market commentators[8] believe that if buyers are able to push beyond this, the market might see a reversal of momentum in favour of the Aussie.

Market commentators[9] point out that currently, the mood regarding the two is in the state of cautiousness as traders are waiting to receive new data on Australia and additional indicators on the side of the US central bank. Some analysts[10] believe that unless both parties provide a powerful catalyst, AUD/USD may continue to move within its present range influenced by cross-currents in the economic news and central bank interventions.

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USD/JPY Trends Reflect Fed and BoJ Policy Divergence

The USD/JPY pair traded around 147.83[11] in Tuesday's Asian session, having hovered near this level with minor fluctuations in recent days. It is noted[12] that the pair traded near the 148.00 mark, and the range of the 30 days trading is fixed on the 146.39 and 148.59 with moderate upward trend during the last month.

Market commentators[13] note that the current trends in the USD/JPY indicate the major monetary policy and economic perspectives differences between the United States and Japan. Market reports[14] point out that the Federal Reserve has indicated a dovish policy after cutting its rates the first time this year, and it is likely to cut its rates twice more before the year-end to worry about a weakening US labour market. Nonetheless, the Fed officials[15] have made hawkish remarks that have helped the US dollar, considering that the Fed is cautious in its action, where the rate cut would be an element of risk management instead of a fast-tracked impetigo.

Market observers[16] have noted that the Bank of Japan (BoJ) has continued with its ultra-loose monetary policy with its key interest rate remaining constant at 0.5 although some of the members of its board have been influenced to tighten. Analysts[17] believe that the dovish policy of the BoJ is informed by low inflation levels and other internal economic problems in the country although some indicators are showing that the BoJ would consider gradual rate increases owing to the issue of inflation and a weakening Yen as opined by political leaders like Yoshimasa Hayashi who is also a contender of becoming prime minister and would encourage a slow normalization process.

Analysts[18] believe that this contradiction of the rates being cut cautiously by the Fed and the tightening that may occur in the BoJ, has placed an upward pressure between the USD/JPY pair. Market commentators[19] note that technically, the pair is trading above the important 148.00 level of psychology, and are close to their 200-day moving average of 148.60, and above that is likely to be the resistance level of 149.00. The nearest support is 147.70-147.65, and further weakness of the yen may occur.

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NZD/USD Struggles Amid Dollar Strength And Economic Concerns

The NZD/USD pair struggled to build on Monday’s rebound from the 200-day Simple Moving Average, with fresh selling pressure seen in Tuesday’s Asian session. The pair traded around 0.5800[20], close to the three-week low touched yesterday. Meanwhile, the US Dollar Index is trading around the 97.00[21] mark, halting its slight retreat off the recent highs. The backing of the dollar is believed to be due to hawkish comments by Fed Chair Jerome Powell[22], which hold the Greenback firm in weight, daunting the New Zealand dollar even further.

Market commentators[23] note that the New Zealand Dollar is experiencing a strain as market bets are high on the further reduction of interest rates by the Reserve bank of New Zealand. This follows poor GDP results last week, which indicated the shrinking economy by 0.9%[24] in the second quarter. Analysts[25] point out that the fall was contrary to the growth of 0.8% experienced in the first quarter and worse than the projected 0.3% decrease casting doubts on the economic prospects of New Zealand.

Analysts[26] note that the US currency is failing to record sustained profits as markets become more and more convinced that the Federal Reserve will lower interest rates twice by the end of the year. Market commentators[27] anticipate that a more upbeat mood in international equities also restrains demand in the secure currency. Analysts[28] anticipate that indicators of the weakening tension of trade between the US and China are assisting in supporting the risk sentiment that can be favourable to the New Zealand Dollar and mitigate losses of the NZD/USD pair.

Market commentators[29] point out that traders can opt to remain on the side-lines before Fed Chair Jerome Powell speaks later in the North American session. Market observers[30] note that this might give some precaution to the market action, and it is only reasonable to wait until the market has clearly broken before making new positions. Analysts[31] believe that such a move would affirm the NZD/USD pair recoil against the main 0.6000 mark, nearly two months high, attained last week.

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USD/CAD Rises as Oil Prices Pressure Loonie

USD/CAD continued to climb for a second straight session and traded near 1.3830[32] in Tuesday's Asian trading. It is believed that the Canadian dollar[33] remains under pressure as falling oil prices weigh on the commodity-linked currency. Market reports[34] indicate that West Texas Intermediate (WTI) has had a five-session losing streak and based on the market the WTI is trading in the 61.90 a barrel range. Analysts[35] note that the issue of oversupply is still pushing the Crude down, blotting out the concern over the Russian Oil supply, and weakening the Loonie which is the most important Oil-exporting currency in Canada.

Market reports[36] point out that Iraq is likely to increase the world oil supply to approximately 230,000 barrels per day in the near future in case it starts crude oil exports via Kurdistan once more after two years. The country is observed to have also boosted exports on the OPEC+ platform with September export of 3.4-3.45 million bd[37] expected. Market observers[38] note that USD/CAD remains stable as the US dollar regains the loss it made Monday with reserved remarks made by FED officials. Market reports[39] point out that the markets are currently awaiting data from US S&P Global PMI and the comments of Fed Chair Jerome Powell later in the day.

Market commentators[40] point out that traders are shifting their focus to the August Price Index of Personal Consumption Expenditures (PCE), which is the favourite inflation measure of the Federal Reserve, and is likely to signal weaker price pressures. Market reports[41] point out that on Monday, the Cleveland Fed President, Beth Hammack, warned that inflation issues would not be resolved easily and emphasized the compromising effort between price control and job maintenance. She emphasized that policymakers should not be relaxed with their easing as inflation is still significantly below the target of the Fed.

Market reports[42] indicate that the Richmond Fed President, Thomas Barkin, stated that tariffs tend to boost consumer prices, advocating that businesses are more concerned with the unpredictable trade policy than high interest rates. He observed that ambiguous trade regulations still loom over business prospects and the cost incurred due to tariffs present additional burdens on the consumers as well as the economic planning in the long term.

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