AUD/USD Price Analysis – Aug 20, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair maintained a bullish stance and remained well bid around the 0.6732 level, reaching an intra-day high of 0.6739.
This upward momentum was driven by several factors, including hawkish sentiment surrounding the Reserve Bank of Australia (RBA).
Additionally, the US Dollar (USD) continues to face downward pressure following comments from Federal Reserve (Fed) officials, which have increased the likelihood of upcoming rate cuts by the US central bank.
Looking forward, traders are cautious ahead of the July FOMC meeting minutes on Wednesday and Fed Chair Jerome Powell’s speech at Jackson Hole on Friday.
Meanwhile, dovish Fed expectations and ongoing geopolitical risks could provide some support for the AUD/USD pair, potentially limiting further declines.
RBA’s Steady Rates and PBoC’s Unchanged LPRs Impact on AUD/USD
On the AUD front, the AUD/USD pair could see some appreciation following the Reserve Bank of Australia's (RBA) August meeting minutes.
These minutes revealed that the RBA considered raising interest rates but ultimately decided that keeping the cash rate steady would better balance the economic risks.
RBA members agreed that a rate cut is unlikely in the near future, suggesting that the cash rate could remain unchanged for an extended period.
This decision reflects the RBA's cautious approach to managing inflation and economic growth, which may provide some support for the Australian dollar against the US dollar.
On the other side, the People's Bank of China (PBoC) kept its one-year and five-year Loan Prime Rates (LPRs) unchanged in August at 3.35% and 3.85%.
Since China is a key trade partner for Australia, any shifts in the Chinese economy could affect Australian markets.
Therefore, RBA's decision to keep rates steady could boost the AUD/USD pair, supporting the Australian dollar. However, China's unchanged LPRs mean any economic changes in China might also impact the pair.
Impact of US Economic Data and Fed Signals on AUD/USD Pair
On the US front, the US Dollar (USD) is under pressure following comments from Federal Reserve (Fed) officials hinting at possible rate cuts.
Minneapolis Fed President Neel Kashkari suggested discussing rate cuts in September due to concerns about a weakening job market.
San Francisco Fed President Mary Daly advocated for a gradual approach to lowering borrowing costs. Chicago Fed President Austan Goolsbee warned against keeping restrictive policies too long.
On the data front, US Housing Starts fell by 6.8% to 1.238 million units in July after a slight increase in June.
However, the University of Michigan’s Consumer Sentiment Index rose to 67.8 in August, marking its first gain in five months. US Retail Sales surged 1.0% in July, a sharp rebound from June’s decline, and Initial Jobless Claims for early August were lower than expected at 227,000.
Meanwhile, the Consumer Price Index (CPI) rose 2.9% year-over-year in July, slightly below June's rate, while Core CPI increased 3.2%, matching forecasts.
The USD's weakness from potential Fed rate cuts and mixed economic data could support the AUD/USD pair. Strong retail sales and consumer sentiment may bolster the Australian dollar against the USD.
AUD/USD - Technical Analysis
The AUD/USD pair is currently trading at $0.67258, showing a modest decline of 0.18%. The pivot point at $0.6738 is crucial for determining the short-term direction.
Immediate resistance is located at $0.6754, with further resistance levels at $0.6771 and $0.6792. On the downside, support levels are found at $0.6704, $0.6684, and $0.6666.
The Relative Strength Index (RSI) stands at 74, indicating that the pair is in overbought territory, which could suggest a potential pullback or correction.
The 50-day Exponential Moving Average (EMA) is positioned at $0.6621, providing a strong support level that reinforces the ongoing bullish trend.
Given the current technical setup, if AUD/USD remains above the $0.6704 support level, the bullish outlook is likely to continue.
A break above the immediate resistance at $0.6754 could push the pair higher towards $0.6771 and beyond.
However, if the pair falls below $0.6704, it could trigger a deeper correction towards the next support levels.
Conclusion: The strategy here is to buy above $0.67037, targeting a profit at $0.67652 with a stop loss at $0.66693.
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