After the publication of PMI indices last Tuesday, macroeconomic data released on Thursday once again confirmed the strength of the American economy. Economists, on the other hand, believe that the stability of the American economy and its relatively high growth rates create conditions for increased investor interest in American assets and government bonds, which, in turn, will contribute to a decrease in their yields and a weakening of the dollar.
The upcoming week will "open" with the release of the retail sales index at the beginning of the trading day on Monday, which is often considered an indicator of consumer confidence and reflects the state of the retail sector in the near future. An increase in the index is usually a positive factor for the AUD, while a decrease in the indicator will have a negative impact on the currency. The previous value of the index (for August) was +0.2%. If the data turns out to be weaker than this previous value, the AUD may temporarily decline. Conversely, if the data exceed the previous values, AUD will likely strengthen.
For now, the Australian dollar is resisting a weakening against the American dollar and is strengthening in major currency pairs.
Last Wednesday, the AUD/USD pair sharply rose after the publication of Australia's Consumer Price Index (CPI) at the beginning of the trading day. The indicator for the 3rd quarter came in higher than expected: +1.2% (+5.4% on an annual basis) compared to expectations of +1.1% and +5.3% on an annual basis.
Commenting on these data, the head of the Reserve Bank of Australia, Michele Bullock, stated on Thursday that "the Consumer Price Index was slightly above" expectations but "roughly where we expected it to be." She also said, "Inflation in the services sector is higher than the level that satisfies us," and "RBA has always had low tolerance for inflation."
Today's release of the Australian producer price index also accelerated in the 3rd quarter, from +0.5% to +1.8%, although it slowed slightly on an annual basis, from +3.9% to +3.8%.
Now, economists expect the RBA to raise the interest rate at the meeting on November 7.
Given that market participants do not currently expect any tightening of monetary policy actions from the U.S. Federal Reserve, while they anticipate an interest rate hike from the RBA in November, the AUD/USD pair has the potential for corrective growth in the period leading up to the December FOMC meeting (December 12-13).
From a technical perspective, a key criterion may be whether the AUD/USD can develop upward dynamics after breaking through an important short-term resistance level of 0.6335 during today's Asian trading session.
Fundamentally, AUD may receive support in the coming week from the publication of significant macroeconomic statistics from China, provided it proves to be strong (China is the world's second-largest economy after the United States and Australia's most important trade and economic partner, as well as a buyer of its raw materials).