AUD/USD Price Analysis – Aug 13, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair maintained a bullish stance and remained well bid around the 0.6598 level, reaching an intra-day high of 0.6610.
This upward momentum was driven by several factors, including hawkish sentiment surrounding the Reserve Bank of Australia (RBA).
Additionally, Australia's Westpac Consumer Confidence increased by 2.8% in August, reversing the 1.1% decline observed in July, which provided substantial support to the Australian dollar (AUD).
Meanwhile, the US dollar (USD) weakened as markets increasingly priced in the likelihood of Federal Reserve (Fed) interest rate cuts, further enhancing the AUD/USD pair's gains.
Risk-on sentiment in the markets also contributed to the pair's upward movement.
Impact of RBA Stance and Economic Data on AUD/USD Pair
On the AUD front, the AUD/USD pair might rise due to a hawkish stance from the Reserve Bank of Australia (RBA).
RBA Deputy Governor Andrew Hauser pointed out that persistent inflation is driven by weak supply and a tight labor market, with significant uncertainty in economic forecasts.
Westpac has revised its RBA outlook, now expecting the first rate cut in February 2025 instead of November 2024, and increasing its terminal rate forecast to 3.35% from 3.10%.
This shift indicates the RBA is more cautious and needs stronger evidence before cutting rates.
Meanwhile, Treasurer Jim Chalmers challenged the RBA's view on the economy, suggesting that large government budgets are adding to inflation.
Additionally, RBA Governor Michele Bullock stated that the bank is ready to raise rates further if necessary, following a steady rate of 4.35% for six consecutive meetings.
On the data front, Australia's Westpac Consumer Confidence rose by 2.8% in August, reversing a 1.1% drop in July.
The Wage Price Index stayed steady with a 0.8% increase in the second quarter, slightly missing the 0.9% forecast.
In China, the Consumer Price Index (CPI) climbed 0.5% year-on-year in July, surpassing the expected 0.3% and the previous 0.2% increase. The monthly CPI also rose 0.5%, recovering from a 0.2% decline earlier.
Therefore, the hawkish stance from the RBA and increased rate forecast could boost the AUD/USD pair, as higher rates typically strengthen the currency.
Conversely, mixed domestic data and China's CPI rise may add volatility but won't likely overshadow the RBA's impact.
Impact of Fed Rate Cut Expectations on AUD/USD Pair
On the US front, the AUD/USD pair is gaining momentum as the US Dollar faces pressure from expectations of a potential interest rate cut by the Federal Reserve (Fed) in September.
However, the likelihood of a significant 50-basis point cut has diminished. Traders are closely monitoring US producer inflation data on Tuesday and consumer inflation figures on Wednesday for signs that price growth remains steady.
Federal Reserve Governor Michelle Bowman highlighted ongoing inflation risks and strong labor market conditions, suggesting that the Fed might hold off on cutting rates in September.
Additionally, Kansas City Fed President Jeffrey Schmid noted that while reducing monetary policy could be considered if inflation remains low, the current policy is not excessively restrictive, and the Fed is still working toward its 2% inflation target.
Therefore, the AUD/USD pair may gain support as expectations of a Fed rate cut put pressure on the US Dollar.
However, diminished chances of a substantial cut and Fed officials' cautious comments on inflation might limit the pair's potential upside.
AUD/USD - Technical Analysis
The AUD/USD pair is currently trading at $0.66043, up 0.09% on the 4-hour chart. The Australian dollar seems to be gaining some ground as it approaches key resistance levels.
The pivot point at $0.6580 is particularly important today; holding above this level suggests that the bulls may continue to push prices higher.
Immediate resistance is located at $0.6620, with further resistance at $0.6659 and $0.6702. If the price can break through these levels, it could signal a continuation of the upward trend.
On the downside, immediate support is found at $0.6547, followed by stronger support levels at $0.6508 and $0.6475.
The 50-day Exponential Moving Average (EMA) at $0.6540 is providing a solid base for the current bullish momentum.
The Relative Strength Index (RSI) is at 62, indicating that while the pair is in bullish territory, it's not yet overbought, leaving room for further gains.
Given the current technical setup, a buy limit at $0.65804 with a target of $0.66437 and a stop loss at $0.65428 seems to be a balanced approach.
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