Australian dollar falls against the increasing US dollar.

On Tuesday, the Australian Dollar (AUD) snaps a three-day winning trend. The US Dollar’s (USD) recovery is dragging on the AUDUSD pair. However, the good Australian Retail Sales helped to the Aussie pair’s strength ahead of the US Federal Reserve’s (Fed) policy announcement on Wednesday. Furthermore, the Reserve Bank of Australia (RBA) will announce its policy decision on November 7.

The Australian central bank is expected to hike policy rates, supporting the AUD.

The Reserve Bank of Australian the strength of rising inflation, the Fed is projected to hike interest rates by 25 basis points at its next meeting. The previous week, Australia’s Consumer Price Index (CPI) showed an increase in the third quarter of 2023, exceeding the gain witnessed in the second quarter. Furthermore, seasonally adjusted Retail Sales (Month-on-Month) pleasantly surprised the market in September, showing a noticeably higher figure.

According to a Chinese study, both manufacturing and non-manufacturing PMI fell in September.

The Chinese data on Tuesday reported a fall in both manufacturing and non-manufacturing Manufacturing Purchasing Managers’ Index (PMI) for September, raising concerns about the world’s second-largest economy’s weak economic circumstances. Given Australia’s position as China’s top trading partner, this development raises the prospect of an impact on the Australian Dollar.

Lower US Treasury yields may hinder the Greenback’s ascent.

The US Dollar Index (DXY) is recouping recent losses. before the US Federal Reserve’s policy decision. The mild economic data given by the United States (US) on Friday failed to provide any assistance for the Greenback, as market players expect the Fed to keep interest rates at 5.5% in the upcoming meeting.

The December meeting, on the other hand, will be data-driven. According to the CME Fedwatch tools, markets expect the Fed to raise interest rates by 25 basis points (bps) during its December meeting.

Australian Dollar Technical Outlook

The Australian dollar is trading at the crucial support level of 0.6350.

The Australian Dollar is consolidating near the key level of 0.6350. The yearly low at 0.6270, which is lined with the main level around 0.6250, may serve as a critical support.

Looking up, the critical resistance at 0.6400 is significant, accompanied by  0.6405, the 50-day Exponential Moving Average (EMA). A solid break over this resistance level might send the euro to the 23.6% Fibonacci retracement level at 0.6417.