Technical Analysis

AUD/USD Price Analysis – Dec 26, 2023

By LonghornFX Technical Analysis
Dec 26, 20233 min

Daily Price Outlook

The AUD/USD currency pair maintained its upward trend and gained some further traction around the 0.6808 level. However, the reason for its upward trend could be attributed to the upbeat market sentiment, which tends to boost riskier assets like the Australian dollar and contributes to the gains in the AUD/USD pair. In the meantime, the bearish US dollar, pressured by bets for an early rate cut by the Federal Reserve, was seen as another key factor that kept the AUD/USD pair higher. The US bond yields and the USD dropped near a five-month low, lending additional support to the gold price.

Fed's Monetary Policy Impact: Potential Rate Cut and Effects on Currency Markets

It's worth noting that the latest US economic report for 2023 had some interesting insights. In November, the Core PCE Price Index, a measure of inflation, rose by 0.1%, slightly below the expected 0.2%. Additionally, Durable Goods Orders saw a 5.5% increase, showing strength in the manufacturing sector. The University of Michigan Consumer Sentiment Index also rose to 69.7 in December.

Surprisingly, the market didn't react much, indicating a steady economy and inflation close to the Federal Reserve's target. This led to increased expectations of easing measures, with US Treasury yields holding steady. The US Dollar index dropped, hitting its lowest level since July at 101.42, benefiting the Australian Dollar.

The Fed's hint at the end of rate hikes and the possibility of future cuts has eased financial conditions, with a 75% chance of a 25 basis points rate cut in March. This shift has not only impacted currency markets but also boosted AUD/USD pair prices.

RBA Hawkish Stance Drives AUD/USD Pair to Impressive 2% Weekly Rally

Another factor that has been boosting the AUD/USD pair was the Aussie's impressive performance, currently on track for a nearly 2% weekly rally. This upward momentum was notably fueled by the hawkish Reserve Bank of Australia (RBA) minutes released earlier this week. The minutes served to underscore the divergence between the RBA's more hawkish stance and the dovish outlook of the Federal Reserve, providing a fresh and significant impulse to the currency pair.

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

AUD/USD - Technical Analysis 

As we approach the end of the year, the Australian Dollar (AUD) against the US Dollar (USD) stands as a testament to the dynamic nature of global currency markets. The AUD/USD pair is currently trading at 0.68150, marking an increase of 0.22%. This upward trend reflects the resilience of the Australian economy and the influence of international market forces.

The pair's pivotal point rests at 0.6719, a crucial benchmark in determining its short-term trajectory. Resistance levels are staged at 0.6775, 0.6853, and 0.6906, indicating potential barriers in the upward journey of AUD/USD.

Conversely, support levels at 0.6636 and 0.6582 will play significant roles in providing a safety net against any downturns. The double appearance of 0.6582 as a support level underscores its importance as a strong foundational point for the currency pair.

The Relative Strength Index (RSI) is at 65, suggesting a bullish sentiment without reaching the overbought territory, signaling room for further appreciation in AUD/USD. The Moving Average Convergence Divergence (MACD) stands at 0.000030, marginally above its signal of 0.002480, reinforcing the bullish outlook.

Furthermore, the AUD/USD pair is trading above its 50-Day Exponential Moving Average (EMA) of 0.6799, confirming the bullish trend in the short term.

The AUD/USD pair's chart patterns have yet to be clearly defined, leaving room for various interpretations. However, the overall market sentiment leans towards a bullish trend.

In conclusion, the AUD/USD pair's overall trend is bullish above the 0.6784 mark, hinting at potential challenges to resistance levels in the near future. This bullish trend is expected to continue, with the pair likely to test higher resistance levels.

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