Technical Analysis

AUD/USD Price Analysis – Dec 19, 2023

By LonghornFX Technical Analysis
Dec 19, 20234 min

Daily Price Outlook

Despite the bullish trend in the US dollar and improved yields on US Treasury bonds, the AUD/USD currency pair has maintain its upward momentum, remaining well-bid around the $0.6715 level. However, this upward trajectory can be attributed to the recent release of the RBA meeting minutes. Furthermore, Australia's strong employment results and increasing incomes serve as indicators of economic resilience, offering some further support to the Australian Dollar and contributes to the AUD/USD pair gains.

Positive Outlook from RBA and Improved Economic Indicators

Australia's Reserve Bank (RBA) is hopeful about inflation getting better and wants it to keep going up. The RBA thinks it's crucial to wait for more information to understand the risks. They want to find the right balance between the possibility of inflation staying high for a long time and the risk of a slowdown in demand. According to RBA staff, they expect inflation to reach the upper range by 2025.

In economic news, Judo Bank's Composite PMI is better at 47.4, Manufacturing PMI is a bit higher at 47.8, and Services PMI increased to 47.6. Australia's Consumer Inflation Expectations for December went down to 4.5% from 4.9%. On a good note, Australian Trade Minister Don Farrell thinks China will remove tariffs on Australian wine, showing improved relations as China already lifted restrictions on most Australian exports.

Therefore, the positive outlook from Australia's Reserve Bank and improved economic indicators may strengthen the Australian Dollar (AUD). Additionally, the potential resolution of trade issues with China could positively impact the AUD/USD pair, leading to potential upward movement.

Potential Impact of US Economic Developments on AUD/USD Pair

The Federal Reserve (Fed) kept interest rates the same at 5.5% in December, just as people expected. However, there's talk about the possibility of lowering rates in the March meeting. Chicago Fed President Austan Goolsbee is open to the idea, and Atlanta Fed President Raphael Bostic thinks a rate cut might happen in Q3 2024, depending on how inflation goes.

On the data front, US S&P Global Services PMI went up to 51.3, but Manufacturing PMI dipped to 48.2. The US Dollar Index (DXY) is holding steady, waiting for news from the US economy. It might get a boost from better yields on US Treasury bonds. Investors are keeping an eye on Tuesday's Building Permits and Housing Starts in the US. On Wednesday, the People's Bank of China (PBoC) will reveal its Interest Rate Decision.

However, New York Fed President John Williams disagrees with the idea of a March rate cut. San Francisco Fed President Mary Daly says even with three rate cuts next year, the Fed will keep a somewhat restrictive stance. Deciding when policy changes might happen in the coming year is too early, according to Daly, as there's ongoing work, and it's not just about getting inflation to 2%.

Therefore, the potential for rate cuts and mixed economic indicators in the US may create uncertainty, impacting the AUD/USD pair. Positive developments, like improved US Treasury yields, could boost the US Dollar, potentially weakening the Australian Dollar against the USD.

AUD/USD Price Chart – Source: Tradingview
AUD/USD Price Chart – Source: Tradingview

AUD/USD - Technical Analysis

As of December 19, the Australian Dollar against the US Dollar (AUD/USD) presents an intriguing scenario in the foreign exchange market. The pair is witnessing a slight upturn, registering a 0.25% increase, with the current price hovering around 0.67226. This movement indicates a tentative bullish sentiment in the short-term outlook.

The technical landscape offers several key levels that traders are closely monitoring. The pivot point is established at 0.6587, serving as a baseline for the pair's movement. In terms of resistance, AUD/USD faces immediate challenges at 0.6658, with further resistance points at 0.6775 and 0.6846. Conversely, the support levels are positioned at 0.6470, 0.6399, and 0.6326, offering potential cushions for any downward trends.

The Relative Strength Index (RSI) is currently at 62, hovering above the neutral 50 mark, indicating a bullish market sentiment. This suggests that investors are showing a preference for the Australian Dollar over the US Dollar. The Moving Average Convergence Divergence (MACD) displays a reading of -0.00027 with a signal line at 0, implying a potential for both upward and downward momentum, adding a layer of uncertainty to the market's direction.

Notably, the 50-Day Exponential Moving Average (EMA) for AUD/USD stands at 0.6712. The pair trading slightly above this level suggests a short-term bullish trend, aligning with the overall market sentiment. Furthermore, the observed upward channel pattern supports the AUD/USD pair, indicating a continuation of the bullish momentum.

In conclusion, the AUD/USD pair displays a bullish trend above the 0.66822 level. The short-term forecast anticipates testing higher resistance levels in the coming days, especially if it sustains above the pivotal EMA and resistance points. However, traders should remain vigilant for any shifts in these technical indicators, which could signal a change in the market's direction.

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