• Australian Dollar retreats from recent gains ahead of the RBA interest rates decision on Tuesday.
• RBA is expected to keep current interest rates at 4.1%.
• Australia’s TD Securities Inflation grew 5.7% in September, lower than 6.1% in August.
• US passed bills to avert a government shutdown, securing funding until November 17.

The Australian Dollar (AUD) snaps the winning streak on the third successive day on Monday. The AUD/USD pair received upward support, primarily supported by the upbeat Chinese PMI data released over the weekend. However, the US Dollar (USD) continues to demonstrate resilience after the moderate economic data released on Friday.

Australia’s TD Securities Inflation (YoY) data showed that inflation estimation in September was lower than August’s readings. The Reserve Bank of Australia (RBA) is expected to keep the interest rate unchanged in the upcoming policy meeting on Tuesday.

However, the Consumer Price Index (CPI) in Australia for the month showed improvement compared to July, which could be attributed to the increasing energy prices. The rise in inflation could impact the RBA’s policy decision.

The US Dollar Index (DXY) holds ground to continue to gain in the second trading session after the moderate datasets from the United States (US). Core Personal Consumption Expenditures (PCE) – Price Index (YoY) for August rose as estimated but lowered than July’s figures.

US Core PCE (MoM) showed a soft reading against the market consensus. While the Michigan Consumer Sentiment Index (Sep) improved from the previous figures.

Additionally, the USD’s strength is attributed to the positive performance of US Treasury yields. The yield on the 10-year US Treasury note hovers below the record highs.

Daily Digest Market Movers: Australian Dollar weakens on market caution, RBA decision

• AUD/USD retraces the intraday losses, trading around 0.6420 at the time of writing during European trading hours on Monday.
• The Aussie Dollar could further face challenges due to increased market caution surrounding the US Federal Reserve (Fed) interest rates trajectory.
• AUD/USD weakens due to the likelihood of the RBA to keep current interest rates at 4.1% in the upcoming policy meeting on Tuesday.
• Australia’s TD Securities Inflation (YoY) rose 5.7% in September, lower than 6.1% in August.
• Australia’s Monthly Consumer Price Index (CPI) year-over-year for August rose 5.2% as expected, up from the previous rate of 4.9%.
• China’s Manufacturing PMI data rose into positive territory. China’s NBS Manufacturing PMI for August grew to 50.2 from the previous 49.7 figures, exceeding the 50.0 expected.
• Additionally, the Non-Manufacturing PMI rose to 51.7 from the 51.0 previous reading, surpassing the market consensus of 51.5.
• The upbeat US Treasury Yields are contributing support to the USD’s strength.
• US Core PCE – Price Index (YoY) for August rose 3.9% as estimated, eased from the previous reading of 4.3%. Core PCE (MoM) showed a soft reading of 0.1% against the market consensus to be consistent at 0.2%.
• US Michigan Consumer Sentiment Index (Sep) improved to 68.1 from the previous figure of 67.7, which was expected to remain unchanged.
• After the Friday session, bills were successfully passed in the US to avert a government shutdown, securing funding until November 17. This development has prompted a resumption of the US Dollar Index (USD) upward trajectory.
• Traders await US ISM Manufacturing PMI for September ahead of Fed Chair Jerome Powell’s speech on Monday. The RBA interest rate decision will be eyed on Tuesday.

Technical Analysis: Australian Dollar drops toward 0.6400, support around September’s low

Australian Dollar trades lower around 0.6390, followed by the 0.6350 level. A firm break below the latter could open the doors for the AUD/USD pair to navigate the region around September’s low at 0.6331 aligned to the 0.6300 psychological level. On the upside, the  23.6% Fibonacci retracement at 0.6464 emerges as the key barrier, followed by the 50-day Exponential Moving Average (EMA) at 0.6482.

AUD/USD: Daily Chart