AUD/USD Price Analysis – Aug 01, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair failed to stop its downward rally and remained under pressure around the 0.6528 level, hitting an intra-day low of 0.6514.
This decline in the AUD/USD pair can be attributed to the renewed strength of the US dollar, which gained traction due to robust economic data and expectations for Federal Reserve policy adjustments.
Despite the Federal Reserve's dovish guidance on interest rates, the US dollar has appreciated, making the Australian dollar less attractive.
Furthermore, the latest inflation report released on Wednesday has reduced expectations that the Reserve Bank of Australia (RBA) will implement another rate hike at its policy meeting next week.
This was seen as another key factor that undermined the AUD currency and contributed to the AUD/USD pair losses.
US Dollar Strength and Anticipated Economic Data Likely to Weaken AUD/USD
On the US front, the broad-based US dollar has seen significant bullish momentum, with the US Dollar Index (DXY) rebounding strongly to 104.20 from an intraday low of 103.86.
This rise in the US dollar is primarily due to market expectations of a robust US economy, despite the Federal Reserve's dovish guidance on interest rates. This has made the Australian dollar less attractive to investors.
On the data front, investors are keenly awaiting the US ISM Manufacturing PMI report for July, set for release at 14:00 GMT.
The PMI is expected to rise slightly to 48.8 from June’s 48.5, indicating continued contraction in manufacturing. Furthermore, the Manufacturing Prices Paid index is predicted to grow more slowly at 51.8, suggesting a moderation in inflation.
The key event for the FX market will be the US Nonfarm Payrolls (NFP) report on Friday, with expectations of a hiring increase of 175K in July, down from 206K. The Unemployment Rate is forecasted to hold steady at 4.1%, while wage growth is expected to slow to 3.7% annually.
Therefore, the US dollar’s strength and anticipated economic data, including the ISM Manufacturing PMI and Nonfarm Payrolls report, are likely to put downward pressure on the AUD/USD pair. The stronger US dollar makes the Australian dollar less attractive to investors.
Mixed Economic Data and Lower RBA Rate Hike Expectations Pressure AUD/USD
On the AUD front, better-than-expected Trade Balance data combined with a softer inflation report has lowered expectations for a Reserve Bank of Australia (RBA) rate hike at the upcoming policy meeting. Economists caution that further rate increases could jeopardize Australia's economic recovery.
Consequently, markets are now pricing in a 50% chance of an RBA rate cut in November, much earlier than the previously anticipated April next year. National Australia Bank (NAB) expects the RBA's cash rate to remain at 4.35% until May 2025, then decline to 3.6% by December 2025, with further decreases in 2026.
On the data front, Australia reported a trade surplus of 5,589 million for June, beating the expected 5,000 million but down from 5,773 million previously. The Judo Bank Manufacturing PMI rose slightly to 47.5 in July, indicating continued but slower deterioration in manufacturing conditions.
Meanwhile, the Monthly CPI increased by 3.8% year-over-year to June, easing from 4% in May, while the RBA Trimmed Mean CPI rose by 3.9% YoY, just under the forecast of 4.0%. Building Permits fell by 6.5% in June, worse than the 3.0% decline expected, but improved from a 3.7% YoY drop in May.
Therefore, the mixed economic data, including a trade surplus and weaker inflation, combined with reduced expectations for an RBA rate hike, has put pressure on the AUD. This could lead to a potential weakening of the AUD/USD pair in the near term.
AUD/USD - Technical Analysis
The AUD/USD pair is trading at $0.65284, reflecting a decline of 0.18% as the currency struggles to maintain upward momentum amidst a strengthening U.S. dollar. On the 4-hour chart, the pair is navigating just below the pivot point at $0.6542, a crucial threshold that could determine near-term direction.
The current price action suggests potential for further declines, especially if the pair fails to reclaim ground above this pivot level.
Immediate resistance is seen at $0.6569, with subsequent hurdles at $0.6610 and $0.6643. These levels are key for bulls looking to reassert control and drive prices higher.
However, with the Relative Strength Index (RSI) at 47, the pair is hovering near the midpoint, indicating a lack of definitive momentum and the possibility of further consolidation.
On the downside, immediate support is located at $0.6493, with additional supports at $0.6459 and $0.6423. These levels are critical for maintaining the current trading range and could attract buyers if the AUD/USD tests these lows.
The 50-day Exponential Moving Average (EMA) at $0.6541 is slightly above the current price, suggesting that bearish pressures may persist unless a decisive move above this average occurs.
Traders might consider entering a short position below $0.65391, targeting a take profit at $0.64931, with a stop loss at $0.65718 to mitigate risk.
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