AUD/USD Price Analysis – Aug 29, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well bid around the 0.6821 level, hitting an intra-day high of 0.6825.
This upward trend can be attributed to several factors, including a bearish US dollar, which lost traction due to the US Federal Reserve signaling that lower interest rates are likely on the horizon.
Additionally, hotter-than-expected Australian CPI inflation data have pushed back expectations of a rate cut by the Reserve Bank of Australia (RBA), providing some support to the Aussie.
Traders are now looking ahead to US Jobless Claims and Gross Domestic Product (GDP) data, set to be released on Thursday, for more clarity on the projected path of US interest rates.
Australian Dollar Strengthens Amid Mixed Economic Signals
On the AUD front, the Australian dollar (AUD) gained strength against the US dollar (USD) following hotter-than-expected inflation data. The country’s Consumer Price Index (CPI) eased to 3.5% in July from 3.8% in June, matching forecasts.
This unexpected inflation level led investors to push back their expectations for a Reserve Bank of Australia (RBA) rate cut, providing support to the AUD/USD pair.
In addition, Australia’s private capital spending fell by 2.2% in Q2, a sharp decline from a 1.0% increase in the previous quarter and worse than the 1.0% growth expected.
Spending on buildings and structures dropped by 3.8%, and plant and machinery saw a 0.5% decline. Investors are now looking to Australian Retail Sales data, due on Friday, for further guidance.
Therefore, the stronger-than-expected Australian CPI data reduced rate cut expectations, supporting the AUD.
However, the drop in private capital spending could weigh on the currency. Overall, the AUD/USD pair may see mixed signals with inflation supporting the Aussie and spending data dampening sentiment.
Impact of US Economic Data and Fed Signals on the AUD/USD Pair
On the US front, the Federal Reserve (Fed) is signaling that lower interest rates might be on the way, putting pressure on the US dollar (USD). Fed Chair Jerome Powell mentioned at Jackson Hole that it’s time for policy adjustments, influenced partly by weakness in the job market.
The upcoming US Nonfarm Payrolls report for August will be crucial, as it could provide insights into the labor market's health and impact the Fed's decision on interest rates.
The upcoming data is crucial for the AUD/USD pair. If the jobs report reveals further weakness or if GDP growth disappoints, it could lead to a weaker USD.
Additionally, the core Personal Consumption Expenditures (PCE) Price Index will be released on Friday, and if it rises to 2.7% as expected, it might lead the Fed to keep interest rates higher for longer, potentially strengthening the USD.
Conversely, lower-than-expected inflation could weaken the USD, supporting the Australian dollar. The AUD/USD pair is likely to react to these developments, with USD weakness providing potential support to the Aussie.
AUD/USD - Technical Analysis
The AUD/USD pair is currently trading at $0.68066, reflecting a 0.26% increase as the Australian Dollar gains traction against the U.S. Dollar.
The pair is showing a bullish bias, comfortably trading above the 50-day Exponential Moving Average (EMA) positioned at $0.6780. This moving average serves as a key support level, indicating that buyers have control in the short term.
The pivot point for the day is set at $0.6831, which also aligns with the first level of immediate resistance. A break above this resistance could open the door for further gains, with the next resistance targets at $0.6849 and $0.6869.
The Relative Strength Index (RSI) is currently at 60, suggesting a strong but not overextended momentum.
This indicates that there’s room for the AUD/USD pair to climb higher before reaching overbought conditions.
On the downside, immediate support is seen at $0.6773, just below the 50-day EMA. Should the pair drop below this level, additional support is found at $0.6752 and $0.6728. A break below these levels would likely shift the momentum to bearish, potentially inviting further declines.
For traders considering entering the market, an entry above $0.67955 looks favorable, with a take-profit target at $0.68312.
A stop-loss at $0.67732 is recommended to limit downside risk. Overall, while the short-term outlook remains bullish, traders should keep an eye on key resistance levels and the RSI for any signs of a reversal.
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