Australian dollar slides as RBA holds rates

• RBA maintains cash rate at 4.35%
• Australian dollar extends slide

The Australian dollar is down sharply for a second straight day. In the European session, AUD/USD is trading at 0.6561, down 0.88%. The Australian dollar has taken a tumble this week, falling 1.70%.

RBA holds rates as expected

The Reserve Bank of Australia maintained the cash rate at 4.35% today. The move had been fully priced in by the markets, so that was no surprise. Nevertheless, the Australian dollar is down sharply, largely on speculation that the RBA’s pause is further speculation that the central bank’s tightening cycle is over.

RBA Governor Michele Bullock trotted out her familiar script that further tightening was on the table if warranted by the data, but after five straight pauses, the markets have their focus on a rate cut in mid-2024. Bullock mentioned that were “significant uncertainties around the outlook” and expressed concern about China. Bullock’s somewhat hawkish rhetoric didn’t help the Australian dollar but was a reminder that although a rate hike is unlikely at the next meeting in February, it can’t be ruled out.

China has endured a bumpy recovery from Covid and earlier today Moody’s rating agency cut its credit outook for China from stable to negative. Moody’s cited concern over slowing growth, rising debt and the crisis in the property sector. China is Australia’s largest export market and a weaker Chinese economy is bad news for Australia’s export sector and the Australian dollar.

The US releases the ISM Services PMI later today. The October print fell to 51.8, down from 53.6 and the lowest in five months. The PMI isn’t expected to show much change in November, with a consensus estimate of 52.0.

Australia releases GDP on Wednesday. The economy is expected to have grown by 1.8% in the third quarter, compared to 1.8% in Q2. An unexpected GDP reading could have a strong impact on the movement of the Australian dollar.

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AUD/USD Technical

• There is support at 0.6530 and 0.6494
• 0.6639 and 0.6712 are the next resistance lines

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