Technical Analysis

AUD/USD Price Analysis – April 16, 2024

By LonghornFX Technical Analysis
Apr 16, 20244 min

Daily Price Outlook

The AUD/USD currency pair has been experiencing a bearish performance and remained well-offered around the 0.6410 level. This downward trend can be attributed to several factors, including risk-off market sentiment fueled by heightened geopolitical tensions, particularly in the Middle East. Traders are closely monitoring developments related to Israel’s response to Iran’s recent air assault, leading to a cautious approach in the market.

Besides this, the differing monetary policy outlooks between the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) have added pressure on the Australian currency. It should be noted that the RBA may need to consider lowering interest rates, contrasting with the potential for the Fed to maintain a more stable or even hawkish stance.

On the data front, China's Gross Domestic Product (GDP) increased by 1.6% from the previous quarter and by 5.3% compared to last year, beating expectations. Industrial production rose by 4.5% in March, slightly lower than expected, and retail sales went up by 3.1%, lower than February's increase. Therefore, China's positive GDP growth and industrial production could help limit deeper losses for the AUD/USD by supporting confidence in economic recovery and demand from China, a key trading partner.

RBA's Potential Interest Rate Cuts and Impact on AUD/USD Pair

On the AUD front, the Reserve Bank of Australia (RBA) is facing increasing speculation about the necessity of lowering interest rates. This prospect has raised concerns among investors and traders, impacting the AUD/USD currency pair. If the RBA decides to cut interest rates, it could lead to a depreciation of the Australian Dollar (AUD) against the US Dollar (USD).

Meanwhile, lower interest rates generally make a currency less attractive to investors seeking higher yields, resulting in capital outflows and downward pressure on the AUD/USD pair. Investors are closely monitoring economic indicators and RBA statements for clues about the future direction of interest rates, as such decisions can significantly influence currency movements.

US Dollar Supported by Strong Retail Sales: Impact on AUD/USD

On the US front, the US dollar has received support recently due to stronger-than-expected US Retail Sales figures. This positive economic data has bolstered confidence in the US economy and diminished sentiments regarding early Federal Reserve (Fed) rate cuts. The stronger Retail Sales data reflects robust consumer spending, a crucial component of economic growth. Therefore, the stronger US Retail Sales data has bolstered the US dollar (USD) and could lead to downward pressure on the Australian Dollar (AUD) against the USD in the AUD/USD currency pair.

Impact of Geopolitical Tension on AUD/USD Pair

On the geopolitical front, ongoing tensions and risk-off market sentiment have also influenced the AUD/USD currency pair. Traders are cautiously monitoring developments related to Israel’s response to Iran’s recent air attack, leading to a more conservative approach in the forex market. However, the heightened geopolitical risks can lead investors to seek safe-haven assets such as the US Dollar, contributing to its strength relative to riskier currencies like the Australian Dollar (AUD).

AUD/USD Price Chart - Source: Tradingview
AUD/USD Price Chart - Source: Tradingview

AUD/USD - Technical Analysis

In today's AUD/USD technical outlook, the pair declined by 0.46% to reach $0.64154, showcasing a bearish sentiment. The pivot point stands at $0.6444, indicating a critical level for market sentiment. Immediate resistance levels are noted at $0.6488, followed by $0.6527 and $0.6553, while support levels are at $0.6408, $0.6382, and $0.6357. Technical indicators reveal the Relative Strength Index (RSI) at 26, suggesting an oversold condition.

Additionally, the 50-day Exponential Moving Average is positioned at $0.6547, signifying a barrier to upside movement. The presence of a double top pattern near $0.6444 suggests persistent resistance, potentially driving a selling trend. As per the technical analysis, an entry strategy below $0.64436 with a take profit target of $0.63829 and a stop loss at $0.64788 could be considered.

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