AUD/USD Price Analysis – Aug 06, 2024
Daily Price Outlook
Despite the RBA's hawkish stance, the AUD/USD currency pair continued its downward trend, trading around the 0.6481 level and hitting an intra-day low of 0.6473.
This decline can be attributed to the US dollar's mild strength, bolstered by the surge in Treasury bond yields, which has continued to exert pressure on the AUD/USD pair.
Furthermore, the escalating geopolitical tensions in the Middle East have undermined the riskier Australian dollar, contributing to further losses.
Moving ahead, traders are watching Tuesday’s US Trade Balance data, the only release for the day, which could impact the USD if bond yields fluctuate.
Risk sentiment will also play a role, while the upcoming Chinese Trade Balance data on Wednesday may influence the AUD/USD pair.
RBA’s Steady Rates and Positive Equity Markets Support AUD/USD, but Economic Concerns Limit Gains
On the AUD front, the Australian Dollar (AUD) gained some traction earlier on Tuesday after the Reserve Bank of Australia (RBA) decided to keep interest rates unchanged and maintain a tight policy to address ongoing inflation.
RBA Governor Michele Bullock supported this decision, noting that controlling inflation might take longer and could require higher rates for a while. This positive outlook, combined with a rise in global equity markets, helped boost the AUD/USD pair.
However, concerns about a potential economic downturn especially given the AUD’s sensitivity to Chinese economic conditions are limiting further gains.
Therefore, the RBA's decision to keep rates steady and maintain a restrictive policy, combined with a positive shift in global equity markets, supported the AUD/USD pair. However, concerns about a potential economic downturn are capping further gains.
Economic Uncertainty and Fed Speculation Keep AUD/USD Under Pressure
On the US front, the recent economic data showing declines in US manufacturing and slower job growth has raised recession fears and speculation about potential Federal Reserve rate cuts. This has led to a drop in US Treasury yields, which impacted the AUD/USD pair.
Despite this, San Francisco Fed President Mary Daly's reassurance that the job market slowdown isn’t a major concern has kept the US dollar relatively supported. The combination of a modestly stronger US dollar and broader economic uncertainties has kept the AUD/USD pair under pressure.
AUD/USD - Technical Analysis
The Australian Dollar (AUD) is showing modest strength against the US Dollar, with the AUD/USD pair trading at $0.64982, up 0.22% on the day.
The currency pair is experiencing a short-term bullish trend, although it remains below the key pivot point of $0.6538.
Immediate resistance is found at $0.6569, with further hurdles at $0.6610 and $0.6643. The AUD/USD must break through these resistance levels to establish a stronger upward trajectory.
On the downside, immediate support is located at $0.6481, followed by additional support levels at $0.6439 and $0.6402. These levels serve as critical markers for traders seeking to manage risk, as a decline below them could signify renewed bearish momentum.
The 50-day Exponential Moving Average (EMA) is currently at $0.6526, slightly above the current price, which could act as a barrier to further gains if the pair struggles to maintain its upward momentum.
The Relative Strength Index (RSI) is at 47, suggesting that the pair is neither overbought nor oversold.
This neutral reading indicates a balanced market, providing an opportunity for traders to capitalize on potential breakout or breakdown scenarios.
Given the current technical setup, the recommended strategy is to consider selling below $0.65234, with a take-profit target of $0.64399 and a stop-loss at $0.65687 to manage potential reversals.
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