Technical Analysis

AUD/USD Price Analysis – Feb 13, 2024

By LonghornFX Technical Analysis
Feb 13, 20244 min

Daily Price Outlook 

Despite improved Australian Consumer Confidence data, the AUD/USD currency pair failed to stop its downward trend and remained well offered around the 0.6521 level. However, the downward trend was mainly driven by the renewed strength of the US dollar, which recently gained traction on upbeat US economic data and hawkish remarks by several Federal Reserve (Fed) officials. On the other hand, the inflation in Australia is slowing down, suggesting the Reserve Bank of Australia might stop raising interest rates. This is pushing the AUD/USD pair lower. In the meantime, the losses in the AUD/USD pair were further bolstered by the weaker Australian money market.

On the positive side, the release of improved Australian Consumer Confidence data was seen as a key factor that kept the lid on any additional losses in the AUD/USD pair. According to the Westpac-Melbourne Institute Consumer Sentiment index, consumer confidence jumped by 6.2% to 86 in February from 81 in January, its highest level in 20 months, but still below the neutral mark of 100 since February 2022.

Impact of Federal Reserve Caution on Interest Rates on AUD/USD Pair

It is worth noting that some Federal Reserve officials are leaning towards maintaining high interest rates for a longer period. Governor Adriana Kugler and Dallas Fed President Lorie K. Logan are hesitant to lower rates despite signs of slowing inflation. Minneapolis Fed President Kashkari also advises being careful, suggesting the possibility of two to three rate cuts in 2024 only if inflation trends are clearer. Boston Fed President Collins recognizes it is tough to reach the 2% inflation goal but needs more proof before thinking about lowering rates. Overall, the Fed is waiting for more inflation data to ensure a steady 2% inflation rate.

So, because some Fed officials are cautious about lowering interest rates, it will make the US dollar stronger compared to the AUD. This could affect the AUD/USD pair by potentially making the dollar more attractive due to expected higher interest rates in the US.

Downward Pressure on AUD/USD Amid Slowing Inflation and Potential Interest Rate Cuts

At home, the Australian Dollar is under pressure as inflation slows down, hinting that the Reserve Bank of Australia may be done raising interest rates. This is making the Australian Dollar weaker against the US Dollar. National Australia Bank's Business Confidence improved slightly, but Business Conditions dropped down. However, the Commonwealth Bank of Australia predicts interest rate cuts starting in September. Meanwhile, in China, consumer prices fell more than expected. All these factors are contributing to the Aussie Dollar's decline. Therefore, this suggests downward pressure on AUD/USD due to slowing inflation, potential interest rate cuts, and weaker business conditions.

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

AUD/USD - Technical Analysis

The Australian Dollar (AUD/USD) registers a slight decline of 0.17%, trading at 0.65190 as market participants adopt a cautious stance ahead of significant economic releases. On a four-hour chart, the currency pair confronts a pivotal point at 0.65343, indicating potential shifts in market dynamics. Resistance levels are identified at 0.65587, 0.65890, and 0.66245, delineating the thresholds for bullish momentum. Conversely, support is established at 0.65005, with additional levels at 0.64809 and 0.64529, suggesting areas where the currency may find footing in case of downward pressure.

Technical indicators, including a Relative Strength Index (RSI) of 48, depict a market in balance, neither overbought nor oversold. The 50-day Exponential Moving Average (EMA) closely aligns with the current price at 0.65160, further emphasizing the currency pair's equilibrium state.

Considering these factors, the outlook for AUD/USD remains cautiously bearish. A proposed sell limit at 0.65339 aims to capitalize on potential declines, with a target profit set at 0.65005 and a stop loss at 0.65501 to mitigate risks. This strategy reflects the nuanced trading environment, where investors are advised to monitor resistance and support closely, gauging the AUD/USD's direction amid evolving market sentiments.

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