AUD/USD Price Analysis – Feb 27, 2024

Daily Price Outlook

Despite the risk-off market sentiment, the AUD/USD currency pair managed to stop its downward trend and attracted some bids around the $0.6545 level. However, the upward movement can be attributed to the release of the improved S&P/ASX 200 on Tuesday, which indicates that the stock market performance, particularly of the top 200 companies listed on the Australian Securities Exchange (ASX), has shown positive growth or gains.

Furthermore, the expected lifting of tariffs on Australian wine by China by the end of March is generally positive news for the Australian Dollar (AUD) as the removal of tariffs can boost Australian wine exports to China, improving trade relations and increasing demand for the Australian Dollar due to improved economic prospects and trade stability.

Moreover, the US dollar lost its momentum and started to decline, even though the Federal Reserve hinted at keeping interest rates high for longer. This change could be linked to the disappointing New Home Sales data and lower US Treasury bond yields. These factors helped the AUD/USD pair stay strong.

Impact of Australian Economic Data and Reserve Bank of Australia Policies on AUD Market Sentiment

On the data front, Australian Consumer Confidence remained nearly unchanged at 83.2, staying below the 85 mark for 56 weeks. However, the unchanged Consumer Confidence and potential rate cut by the Reserve Bank of Australia may weaken the AUD, but economic updates could change its direction. Nevertheless, the downbeat data is overshadowed by the improved S&P/ASX 200. This index reflects the performance of the top 200 companies listed on the stock market, suggesting positive market sentiment and potentially supporting the Australian Dollar's recovery.

Investors are keeping a close eye on two key economic indicators: the Consumer Price Index (CPI) and Retail Sales. Experts now think the Reserve Bank of Australia might cut interest rates by 0.25% in November, rather than August as previously thought.

Impact of Federal Reserve Statements and US Economic Data on AUD/USD pair

Moreover, the broad-based US dollar is struggling to bounce back but remains bearish amid lower US Treasury yields and previously released downbeat US home data. However, the losses in the US dollar could be temporary as the latest meeting minutes and statements from Federal Reserve officials indicate they're not rushing to lower interest rates.

On the data front, US New Home Sales Change (MoM) rose by 1.5% in January, lower than the previous growth of 7.2%. January's US New Home Sales (MoM) reached 0.661M, missing the expected 0.680M and the prior figure of 0.664M. The lower-than-expected growth in US New Home Sales and missing sales figures indicate potential weakness in the housing market, which could negatively impact the US Dollar.

Impact of Geopolitical Tensions and Economic Recession on AUD/USD Pair

In contrast to this, the risk-off market sentiment pressured by the ongoing tensions in the Middle East tends to undermine riskier assets like the AUD currency and could cap gains in the AUD/USD pair. On the other hand, the recession in Japan and the UK continues to hinder growth in the AUD/USD pair. Japan's GDP recorded an unexpected decline, following a significant contraction of 3.3% in the previous quarter. Furthermore, Japan's position as the world's third-largest economy was overtaken by Germany. The IMF foresees Germany surpassing Japan in economic size.

AUD/USD - Technical Analysis

In the currency markets, the AUD/USD pair has seen a slight decline of 0.07%, positioning itself at 0.65263 as of February 27. Despite the dip, the Australian dollar exhibits resilience against the US dollar, with key technical indicators and price levels suggesting a nuanced outlook.

The pair hovers below the pivot point of 0.6559, a crucial level for traders monitoring potential shifts in momentum. Resistance levels are staged at 0.6599, 0.6637, and 0.6675, marking thresholds for bullish advances. Conversely, support levels at 0.6487, 0.6451, and 0.6417 delineate zones where buyers might emerge to uphold the pair's value.

Technical indicators shed light on the current market dynamics. The Relative Strength Index (RSI) at 45 suggests that the AUD/USD is neither overbought nor oversold, indicating a potential for either direction depending on market sentiment. The Moving Average Convergence Divergence (MACD) stands at -0.0004 with a signal of -0.0002, hinting at a narrowly bearish sentiment but with room for reversal. The 50-day Exponential Moving Average (EMA) at 0.6545 closely aligns with current prices, suggesting a consolidation phase.

An upward trendline on the 4-hourly chart and a bullish engulfing pattern around the 0.6525 level signal a sturdy support zone, bolstering the case for a potential uptick. Considering these factors, the technical outlook for AUD/USD leans towards cautious optimism.