AUD/USD Price Analysis – Aug 15, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair experienced a bullish trend and drew strong bid around the 0.6628 level, and reaching an intra-day high of 0.6631.
This recovery was fueled by the release of upbeat employment data in Australia and supportive economic signals from China.
The Australian Dollar (AUD) managed to regain some ground after facing downward pressure due to declining commodity prices and mixed economic indicators.
In contrast, the US Dollar (USD) weakened following moderate inflation data that led investors to reassess Federal Reserve (Fed) interest rate expectations.
Impact of Australian Economic Data and RBA Stance on AUD/USD Pair
On the AUD front, the AUD/USD pair's recovery is partly attributed to the Reserve Bank of Australia's (RBA) monetary policy outlook.
Despite challenges from falling copper and iron ore prices, which have added pressure on the commodity-linked currency, the RBA's hawkish stance remains a key support factor.
RBA Governor Michele Bullock emphasized that the central bank is vigilant about inflation risks and is prepared to increase rates further if necessary.
On the data front, the Australian Employment Change for July showed a robust increase of 58.2K, surpassing expectations of 20.0K, although the Unemployment Rate edged up to 4.2% from the anticipated 4.1%.
Additionally, China's economic data, including a 2.7% increase in Retail Sales and a moderate 5.1% rise in Industrial Production, provided a backdrop of cautious optimism.
Despite the positive employment data, Australia's Westpac Consumer Confidence increased by 2.8% in August, reversing a 1.1% decline in July, reflecting improved sentiment.
However, the Wage Price Index for Q2 was slightly below expectations at 0.8%, highlighting ongoing economic uncertainties.
Therefore, the RBA's cautious approach and high wage growth expectations continue to influence the AUD/USD pair, with market participants closely monitoring the central bank's next moves.
Impact of US Economic Data and Fed Rate Cut Expectations on AUD/USD Pair
On the US side, the AUD/USD pair gained momentum as the US Dollar (USD) lost its traction and edged lower amid dovish Federal Reserve’s (Fed) interest rate outlook.
It should be noted that the moderate increase in July’s Consumer Price Index (CPI) to 2.9% year-over-year, coupled with a slight decrease in Core CPI to 3.2%, has fueled speculation about potential Fed rate cuts.
Market expectations currently lean towards a modest 25 basis point cut in September, with a 36% chance of a larger 50 basis point reduction.
However, Federal Reserve officials, including Chicago Fed President Austan Goolsbee and Governor Michelle Bowman, have expressed concerns about inflation risks and the labor market.
These remarks suggest that substantial rate cuts may be less likely, which could temper the US Dollar’s weakness.
AUD/USD - Technical Analysis
The AUD/USD pair is showing a modest uptick, currently trading at $0.66210, which is slightly above its pivot point of $0.66058.
This positioning suggests a bullish sentiment in the short term, especially as the price is holding above the 50-day Exponential Moving Average (EMA) at $0.66015.
The 4-hour chart indicates that the pair is trying to build momentum, with the immediate resistance at $0.66434 being the next hurdle for bulls to overcome.
If the pair can break through this resistance, it may target higher levels at $0.66696 and $0.67019, signaling a continuation of the upward trend.
However, on the downside, the immediate support lies at $0.65809, followed by $0.65471 and $0.65127. These support levels are crucial; a break below them could indicate a shift in sentiment towards a bearish outlook.
The Relative Strength Index (RSI) is currently at 54, which suggests that the market is neither overbought nor oversold, allowing room for further movement in either direction.
With the price hovering around the pivot point and supported by the 50 EMA, the technical outlook leans slightly bullish for now.
For traders looking to enter the market, a buy limit order at $0.66051 could be strategic, with a take profit set at $0.66666. Setting a stop-loss at $0.65707 would help manage risk in case of an unexpected downturn.
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