AUD/USD Price Analysis – Aug 08, 2024

Daily Price Outlook

During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well bid around the 0.6554 level, hitting an intra-day high of 0.6565. This upward trend can be attributed to Reserve Bank of Australia (RBA) Governor Michelle Bullock's hawkish guidance on interest rates, which supported the Australian dollar and contributed to the AUD/USD pair's gains.

Meanwhile, the US dollar losing traction was another key factor keeping the AUD/USD pair higher. However, market sentiment remains risk-averse due to fears of a potential global slowdown, which could cap gains in the AUD/USD pair as it undermines riskier assets, including the Australian dollar.

RBA's Hawkish Outlook Strengthens Australian Dollar and AUD/USD Pair

On the AUD front, the Australian dollar strengthened following Reserve Bank of Australia (RBA) Governor Michelle Bullock's hawkish outlook on interest rates. During a talk at the Rotary Club of Armidale, she emphasized that the RBA is prepared to increase the Official Cash Rate (OCR) to manage inflation risks.

Bullock also noted that inflation is unlikely to return to the target range of 2-3% before the end of 2025. Her comments show the RBA's strong commitment to controlling inflation, which boosted confidence in the Australian dollar and led to its increase in value.

She noted that the inflation rate is unlikely to return to the 2-3% target range before the end of 2025. This assertive stance on inflation and potential rate hikes bolstered the Australian dollar, reflecting increased confidence in the RBA's commitment to managing economic pressures.

Therefore, the hawkish stance by RBA Governor Bullock likely supports the Australian dollar, potentially strengthening the AUD/USD pair as markets anticipate further rate hikes and increased inflation vigilance.

US Dollar Pressure and Fed Rate Cut Speculation Boost AUD/USD

On the US front, the broad-based US dollar remained under pressure, struggling to gain traction amid softer economic data signaling a faster-than-expected slowdown in the world's largest economy. This has fueled speculation about larger interest rate cuts by the Federal Reserve, thereby supporting the non-yielding yellow metal, gold.

On the economic data front, government figures released on Tuesday showed that the US trade deficit narrowed by 2.5%, decreasing to $73.1 billion in June from $75.0 billion in May. This reduction was primarily driven by a 1.5% rise in exports, particularly in aircraft and US-produced oil and gas.

As a result, markets are now fully pricing in a 100% likelihood that the Federal Reserve will begin lowering borrowing costs at its upcoming policy meeting in September, with nearly a 70% probability of a 50-basis-point rate cut.

Therefore, the pressure on the US dollar and speculation about Fed rate cuts could strengthen the AUD/USD pair, as lower US interest rates may make the Australian dollar more attractive relative to the greenback.

AUD/USD - Technical Analysis

The AUD/USD pair is currently trading at $0.65553, reflecting a 0.57% increase on the day. On the 4-hour chart, the pivotal point to watch is $0.6511.

Immediate resistance levels are marked at $0.6576, $0.6610, and $0.6643, while support levels are positioned at $0.6475, $0.6436, and $0.6402. These levels are crucial in determining the pair's next move.

The Relative Strength Index (RSI) stands at 56, suggesting a moderately bullish sentiment. The 50-day Exponential Moving Average (EMA) is currently at $0.6523, indicating a slight upward trend.

If the price remains above the pivot point, it could signify continued bullish momentum. However, a fall below this level might shift the sentiment to bearish.

Given the current market conditions, a strategic entry at a buy limit order of $0.65235 is recommended, with a take profit target at $0.66096 and a stop loss at $0.64865.

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