• Australian Dollar gains ground due to the decline in the US Dollar.
• Australia’s TD Securities Inflation reduced to 5.1% in September from 5.7% prior.
• RBA is expected to increase interest rates by 25 basis points in its policy decision on Tuesday.

The Australian Dollar (AUD) holds strong on Monday, aiming to mark a three-month high. The AUD/USD pair continues to gain ground for the fourth successive day, gearing up for the Reserve Bank of Australia's (RBA) interest rate decision set to be unveiled on Tuesday.

Australia's central bank is set to announce its policy decision on Tuesday. Expectations are leaning towards a 25 basis points increase, a move in line with Australian inflation teetering at the edges, providing support to the Australian Dollar (AUD). Moreover, the RBA Shadow Board suggests a cash rate increase in November. It assigns a 62% probability of raising the cash rate to a level above 4.10%.

The AUD/USD pair experiences an additional uplift due to an improved risk appetite. This sentiment is fueled by the possibility that the US Federal Reserve (Fed) has completed its monetary policy tightening, as indicated by cooling economic data from the United States (US).

US Dollar Index (DXY) experienced a significant drop of over 1.0% in the previous session. This decline was influenced by downbeat US Treasury yields, a reaction to the weaker-than-expected nonfarm payrolls released on Friday. The disappointing employment data contributed to subdued sentiment for the US Dollar (USD).

Daily Digest Market Movers: Australian Dollar extends gains on weaker US Dollar, focus on RBA policy decision

• Australia’s TD Securities Inflation (YoY) reduced to 5.1% in September from 5.7% prior.
• Australia’s Retail Sales improved to 0.2% in the third quarter from the previous reading of -0.6%.
• Aussie Trade Balance (Month-on-Month) decreased to 6,786M in September, falling short of expectations set at 9,400M and down from the previous figure of 10,161M.
• In the twelve months leading up to September 2023, Australia’s monthly Consumer Price Index (CPI) recorded a 5.6% increase. However, the quarterly inflation rate dipped to 5.4% year-on-year in Q3.
• US Bureau of Labor Statistics recently unveiled the Non-Farm Payrolls (NFP) data for October, disclosing a figure of 150K. This missed the expected 180K and marked a substantial drop from September's 297K.
• US Average Hourly Earnings (Month-on-Month) saw a decline to 0.2%, deviating from the anticipated 0.3%. On a year-over-year basis, it came in at 4.1%, surpassing the 4.0% expectations.
• US ISM Services Purchasing Managers' Index (PMI) declined from the previous 53.6 to 51.8. Additionally, on Thursday, the US Department of Labor released the count of initial claims for unemployment benefits for the week ending October 27, showing an increase from 212,000 to 217,000.

Technical Analysis: Australian Dollar maintains its position above 0.6500 major level ahead of the RBA decision

The Australian Dollar hovers around 0.6510 near the resistance area at the 38.2% Fibonacci retracement level aligned with the September’s high at 0.6521, followed by the 0.6550 major level. On the downside, the seven-day Exponential Moving Average (EMA) at 0.6436 could act as the immediate support following the annual low at 0.6270.