AUD/USD Price Analysis – Aug 27, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair maintained a bullish stance and remained well bid around the 0.6782 level, reaching an intra-day high of 0.6792.
This upward momentum was supported by upbeat market sentiment, which bolstered riskier assets like the Australian dollar (AUD).
However, the market sentiment gained traction as the Federal Reserve (Fed) is expected to start cutting interest rates in September.
This optimism is reflected in the S&P 500 futures, which have shown solid gains during European trading hours.
On the other side, the upticks in the currency pair could be short-lived as investors await the release of Australia’s Consumer Price Index (CPI) data for July on Wednesday. However, the annual inflation rate is expected to slow to 3.4% from the previous 3.8%.
Thus, the drop in inflation could lead to speculation that the Reserve Bank of Australia (RBA) may not cut interest rates this year.
Expected CPI Slowdown Could Boost AUD/USD as RBA Rate Cuts Seem Unlikely
On the AUD front, the Australian dollar's rally has slowed as investors turn their attention to the upcoming Consumer Price Index (CPI) data for July, which is due out on Wednesday.
The focus is on how this data might influence the Reserve Bank of Australia's (RBA) future decisions.
On the data front, inflation is expected to have slowed to 3.4% annually, down from 3.8% previously.
If inflation does indeed decrease, it could lead to speculation that the RBA will hold off on cutting interest rates this year, which might support the Australian dollar.
The market is closely watching to see how this data will shape the RBA's next moves and impact the AUD's performance.
Therefore, the expected slowdown in inflation may support the AUD/USD pair by reducing the likelihood of RBA rate cuts. If the RBA maintains rates, the Australian dollar could strengthen, potentially driving the AUD/USD pair higher.
Impact of Fed's Mixed Signals and Strong US Data on AUD/USD Dynamics
Despite the bullish US Dollar, the AUD/USD pair is gaining momentum amid positive risk sentiment. However, the recent comments from Federal Reserve officials hint at possible upcoming interest rate cuts, which could lend support to the Australian dollar.
Fed Chair Jerome Powell has indicated potential policy adjustments, expressing confidence that inflation is nearing the Fed's 2% target.
Meanwhile, San Francisco Fed President Mary Daly suggested that the time might be right to consider rate cuts, and Richmond Fed President Thomas Barkin advocated for a "test and learn" approach. These mixed signals from the Fed could influence market dynamics and impact the USD.
On the data front, the US economy demonstrated strength as Durable Goods Orders surged 9.9% in July, the highest increase since May 2020 and significantly surpassing expectations.
Despite this robust economic data, markets have fully priced in a 25 basis points rate cut, with a 30% probability of a larger cut, down from 36.5% the previous week.
Therefore, the mixed signals from the Fed, coupled with strong US economic data, may support the AUD/USD pair.
Interest rate cut speculation could bolster the Australian dollar, while robust US data might limit USD gains, influencing AUD/USD dynamics.
AUD/USD - Technical Analysis
The AUD/USD pair is currently trading at $0.67752, up 0.18% on the day, signaling a modest bullish trend.
The pivot point to watch is $0.6761. If prices stay above this level, the pair could continue its upward momentum, with immediate resistance at $0.6796, followed by $0.6816 and $0.6837.
A break above these levels could further solidify the bullish trend, with the potential to test higher levels in the short term.
On the downside, immediate support is found at $0.6740, with additional support levels at $0.6717 and $0.6696, providing a cushion for any pullbacks.
The 50-day Exponential Moving Average (EMA), currently at $0.6752, is serving as a crucial support level. As long as the AUD/USD remains above this EMA, the outlook remains positive, with the trend likely to stay bullish.
The Relative Strength Index (RSI) is at 55, indicating that the market is leaning towards bullish territory but isn't overbought, leaving room for further upside.
In summary, the technical indicators suggest that buying interest will likely strengthen if the pair remains above the pivot point at $0.6761.
Traders should consider entering long positions above $0.67614, targeting $0.67957, with a stop loss set at $0.67432 to manage risk. However, a drop below $0.6740 could signal a potential shift towards a bearish trend.
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