Impacted by increasing uncertainty in the global economic outlook and weak domestic economic data, the Australian dollar has recently been on a declining trend, breaking through critical support levels. Over the past week, market concerns about global trade have intensified, particularly with expectations that new trade policies may bring a harsher external environment. Given Australia's heavy reliance on global trade, this has resulted in the Australian dollar underperforming compared to other G10 currencies. The Australian dollar against the US dollar has fallen below the 23.6% Fibonacci support level of 0.6490, currently trading around 0.6460, with the next support level at the August 5th low of 0.6350.
Meanwhile, Australia's employment data for October was disappointing, with only 16,000 jobs added, below market expectations of 25,000 and last month's 61,300. The weak employment figures have led to more cautious market expectations for the Australian dollar, reflecting signs of an economic slowdown. However, the three-month average data show that Australia's labor market remains resilient, with average job additions exceeding 40,000 and an unemployment rate holding steady at 4.1%, lower than pre-pandemic levels, providing some support for the Australian dollar.
Despite the economic data falling short of expectations, the market remains stable about the Reserve Bank of Australia's policy direction, expecting the first rate cut to begin in mid-2025. Compared to other central banks that have already entered a rate-cutting cycle, the RBA’s policy pace is relatively late, offering interest rate support for the Australian dollar. However, the risk of an economic slowdown in advance still exists, which might lead to an earlier rate cut, putting further downward pressure on the Australian dollar.
Analysts point out that the main risk facing the Australian dollar currently is if economic expectations weaken further, the pace of rate cuts could accelerate, potentially causing the Australian dollar to continue its downtrend in the coming months.
