AUD/USD Price Analysis – Feb 29, 2024

Daily Price Outlook

Despite the risk-off market sentiment and the bullish US dollar, the AUD/USD currency pair managed to attract some bids and edged higher around the $0.6520 level. However, the upward movement can be attributed to the release of upbeat consumer spending data from Australia on Thursday. Australia's economy grew by 1.1% in January, which is lower than expected but still a positive turn compared to the 2.7% decline in the previous month. This bolstered confidence in the Australian dollar and contributed to the gains in the AUD/USD pair.

In contrast, the risk-off market sentiment, pressured by cautiousness ahead of the release of key US Personal Consumption Expenditures - Price Index data, was seen as a key factor that capped further gains in the AUD/USD pair by undermining riskier assets like the Australian dollar. Another factor that could cap gains in the AUD/USD pair is the bearish Aussie equity market, which opened lower following losses in the tech sector on the final day of company reporting.

Positive Economic Indicators Support the Australian Dollar (AUD)

On the data front, Australian Retail Sales in January increased by 1.1%, a bit lower than expected but a turnaround from the previous decline. Private Capital Expenditure in the fourth quarter of 2023 improved by 0.8%, surpassing expectations. However, Monthly Consumer Price Index (CPI) for January remained steady at 3.4%, slightly below what was anticipated. Construction Work Done also rose by 0.7% in the same quarter, slightly missing expectations. Meanwhile, ANZ-Roy Morgan Australian Consumer Confidence stayed nearly the same at 83.2, marking the 56th straight week below the 85 threshold, just a tad below the weekly average of 83.6 for 2024.

Hence, the positive impact on the AUD currency comes from the increase in Australian Retail Sales and Private Capital Expenditure, indicating economic resilience and potential growth. Despite the steady CPI and slight miss in Construction Work Done, the overall picture suggests underlying strength, which could boost confidence in the Australian economy and support the AUD.

US Dollar Strength and Economic Indicators Impacts on AUD/USD

On the US front, the broad-based US Dollar maintained its upward stance and holding steady, thanks to the higher US Treasury yields. The Federal Reserve is being careful about its next moves and they're talking about the possibility of cutting interest rates later this year, which could help keep the US dollar strong because the delaying rate cuts can be interpreted as a hawkish stance. This means the Fed is confident in the current economic conditions and may be less inclined to provide additional stimulus through rate reductions. This strengthened the US dollar and could cap further gains in the AUD/USD pair.

John Williams, who heads the New York Federal Reserve, says they might cut rates if inflation stays low, but they need to see more data first. Susan Collins, from the Boston Federal Reserve, agrees but wants to be sure before making any moves. Hence, the chances of a rate cut happening in March are pretty low, at just 3.0%, but they go up in May and June.

On the data front, the preliminary US Gross Domestic Product (GDP) for the fourth quarter of 2023 grew by 3.2%, slightly below expectations. The GDP Price Index increased by 1.7%, surpassing expectations. However, the US Housing Price Index rose by only 0.1% in December, lower than expected. Durable Goods Orders fell by 6.1%, worse than expected, while New Home Sales Change grew by 1.5%, below the previous increase. January's New Home Sales reached 0.661 million, missing expectations. These figures indicate mixed performance in the US economy, affecting market sentiments differently.

AUD/USD - Technical Analysis

On February 29, the AUD/USD pair showed modest progress, ascending by 0.18% to reach 0.65167. This slight uptick reflects a tempered optimism in the forex market, as traders digest various global economic indicators and policy decisions.

The currency pair is currently trading just below its pivot point of 0.65258, indicating a critical juncture that could determine the direction of its next move. Resistance levels are set at 0.65579, 0.65829, and 0.66088, marking potential hurdles that the AUD/USD must overcome to sustain its upward trajectory. Conversely, support levels at 0.64904, 0.64698, and 0.64425 provide a safety net, potentially cushioning any downward pressure and serving as key areas for buyers to re-enter the market.

Technical indicators provide further insight into the pair's dynamics. The Relative Strength Index (RSI) stands at 44, suggesting a slight lean towards oversold conditions without fully crossing the threshold, indicating that there might be room for downward movement or consolidation. The 50-day Exponential Moving Average (EMA) at 0.65336, slightly above the current price, signals a potential resistance area that could influence the pair's short-term trend.