Technical Analysis

AUD/USD Price Analysis – Jan 02, 2024

By LonghornFX Technical Analysis
Jan 2, 20243 min

Daily Price Outlook

Despite the bearish US dollar, the AUD/USD currency pair managed to halt its downward rally and recovered ground near 0.6830 on Tuesday. The reason for its upward trend could be attributed to the risk-on market sentiment and robust inflation and housing prices. The recent meeting minutes highlighted that the Reserve Bank of Australia (RBA) wants to check more data before deciding on future interest rates. The expectation that the RBA won't cut rates in the upcoming February meeting supports the Australian Dollar (AUD).

Strong China Manufacturing PMI Lifts AUD/USD, Reflecting Market Optimism

It's worth noting that China's Caixin Manufacturing Purchasing Managers Index (PMI) rose to 50.8 in December, surpassing expectations of 50.4 and the previous 50.7. This positive manufacturing data could boost the Aussie Dollar (AUD) due to strong trade ties with China. The report highlights increased output and new orders, especially in consumer goods. As a result, the AUD/USD reacted positively, bouncing from session lows of 0.6806 to 0.6817, up 0.08% on the day. This indicates the market's response to China's encouraging manufacturing performance.

US Economic Slowdown and Fed Rate Cut Speculations Drive AUD/USD Pair Gains

In addition, the US Dollar Index (DXY) is gaining, but it faces challenges from recent dips in US labor data, Core PCE Inflation, and GDP Annualized. The Chicago Purchasing Managers Index, released by ISM-Chicago, shows easing business conditions in December across Illinois, Indiana, and Michigan. These indicators suggest a slowdown in the US economy in the fourth quarter, hinting at a potential soft landing. This supports the idea of Fed rate cuts in 2024, putting downward pressure on the USD and contributing to gains in the AUD/USD pair.

Therefore, the news of a potential slowdown in the US economy and the possibility of Fed rate cuts in 2024 has led to downward pressure on the US Dollar (USD), contributing to gains in the AUD/USD pair.

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

The AUD/USD pair has shown a modest upward movement on Tuesday, trading at 0.6815, reflecting a slight gain of 0.04%. The pair is currently hovering around a pivot point of 0.6771. Looking ahead, key resistance levels are identified at 0.6822, 0.6861, and 0.6910, while immediate support can be found at 0.6732, followed by stronger supports at 0.6683 and 0.6634.

From a technical standpoint, the Relative Strength Index (RSI) sits at a neutral 50, indicating an equilibrium between buyers and sellers. The Moving Average Convergence Divergence (MACD) is almost flat at -0.0006, suggesting a lack of clear directional momentum. Notably, the pair is trading slightly below its 50-Day Exponential Moving Average (EMA) of 0.6819, though the upward trendline support around 0.6793 and recent closing above the 50 EMA suggest potential for an uptrend.

In conclusion, the AUD/USD pair presents a cautiously optimistic scenario. Traders might consider a buy limit at 0.67986, targeting a take profit at 0.68526, with a stop loss placed at 0.67590, while closely monitoring these technical indicators and chart patterns for further market direction.

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