AUD/USD climbs as commodities stabilise and Trump appoints Treasury secretary

Stabilising commodities and Trump’s Treasury pick boost AUD/USD

AUD/USD closed higher last week at 0.6500 (0.60%), supported by stabilising commodity prices and risk-seeking flows.

The pair gained further strength at the start of the week after President-elect Donald Trump announced Scott Bessent as the new US Treasury secretary following Friday's market close.

How Bessent's appointment is shaping the markets

Wall Street has been closely monitoring this selection, and Bessent’s appointment has received an initial vote of confidence from the market. This support likely stems from his extensive market expertise, honed through work with hedge fund legends George Soros and Stanley Druckenmiller, as well as his measured approach to tariffs, advocating that they 'be layered in gradually.'

As trading resumed, the impact was felt across asset classes. Nasdaq equity futures rose 0.5% to 20,958, while the yield on the US 10-year Treasury bond fell by 5 basis points (bp) to 4.341%, retreating further from last week's high of 4.50%.

The US dollar softened against multiple currencies. with the euro has gained 0.62%, reaching 1.0478, while AUD/USD is trading at 0.6525 (0.38%) after reaching a session high of 0.6550.

This week's key events

• Release of the October monthly consumer price index (CPI) due Wednesday, 27 November at 11.30am AEDT
• Annual Committee for Economic Development of Australia (CEDA) Conference in Sydney, where Reserve Bank of Australia (RBA) Governor Michelle Bullock is due to speak on Thursday, 28 November at 7.55pm AEDT.

Insights from the monthly CPI indicator

Recent Australian inflation data released in late October came in slightly below expectations:

• Headline inflation: increased 0.2% in the third quarter (Q3) (vs consensus +0.3%), reducing the annual rate to 2.8% year-on-year (YoY) from 3.8%, below the 2.9% forecast
• Trimmed mean inflation: rose 0.8% in Q3 (in line with expectations), lowering the annual rate to 3.5% from 4.0%. This marked the seventh straight quarter of slowing annual trimmed mean inflation
• Monthly CPI (September): increased 2.1%, down from 2.7% in August. Core CPI eased to 3.2% YoY in September from 3.4% in August.

Minutes from the RBA’s November Board meeting confirmed current policy settings aim to return inflation to target 'within a reasonable time frame while preserving as many of the gains in the labour market as possible.'

As October is the first month of a new quarter, only about 60% of the CPI basket will be updated. The data will likely focus on goods rather than services like dining out, healthcare, and transport. Economists expect the October monthly CPI to rise by 2.3% YoY. However, with government cost-of-living rebates still in effect, most analysts see little chance of an RBA interest rate cut before mid-2025.

AU monthly CPI indicator chart

AUD/USD technical analysis

AUD/USD rejected multi-month downtrend resistance at 0.6900 - 0.6910 in late September. This resistance aligns with the February 2021 high of 0.8007 and the July 2011 high of 1.1081. After its rapid decline, it is eyeing multi-month trend line support at 0.6360 - 0.6350.

AUD/USD weekly chart

From its late September high of 0.6942 to its mid-November low of 0.6440, AUD/USD declined over 7% in just seven weeks.

While the current bounce from 0.6440 could extend higher to alleviate oversold conditions, it is viewed as countertrend. Sellers are expected to position themselves ahead of the 200-day moving average at 0.6620 - 0.6630, anticipating another leg lower towards multi-week trendline support at 0.6360 - 0.6350.

A sustained break above the 200-day moving average at 0.6620 - 0.6630 is necessary to negate downside risks and shift to a more neutral bias.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 25 November 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}