Technical Analysis

AUD/USD Price Analysis – Jan 04, 2024

By LonghornFX Technical Analysis
Jan 4, 20244 min

Daily Price Outlook

The Australian Dollar (AUD) struggled to stop its losing streak on Thursday, facing persistent downward pressure against the US Dollar (USD). However, the primary factors contributing to this trend include a ongoing risk-off sentiment and a general bearish session in the commodity complex. In the meantime, the softer-than-expected Judo Bank Purchasing Managers Index (PMI) data further added to the challenges for the Aussie Dollar. It should be noted that the country's services sector witnessed a contraction in December, with the Judo Bank Services PMI reporting a reading of 47.1, falling short of market expectations. The Composite PMI also decreased to 46.9, marking the fastest pace of services contraction since the third quarter of 2021.

Judo Bank Economist Matthew De Pasquale Optimistic About Stable Economic Slowdown in Australia

Economist Matthew De Pasquale from Judo Bank shared his views on Australia's economy. He mentioned that recent data over the past two months suggests a slowdown in the country's economy. However, he noted that the slowdown doesn't seem to be getting worse. Despite challenges for households due to higher interest rates, important economic measures like output and new orders are in line with the Reserve Bank of Australia's expected gradual economic slowdown.

De Pasquale's insights, indicating a slowing but not worsening Australian economy, bring stability to the AUD/USD pair. Following the RBA's predicted soft landing scenario, it might ease some pressure on the Australian Dollar.

Global Factors and US Economic Indicators Shape AUD/USD Trajectory

On the other hand, the broader global factors also plays a significant role in shaping the trajectory of the AUD/USD pair. The US Dollar Index (DXY) remains on a positive trajectory, strengthened by improved US Treasury yields. This was seen as another key factor that kept the AUD/USD pair down. However, the positive momentum in the dollar may find support from the better than expected ISM Manufacturing PMI report, showing an increase to 47.4 in December. However, challenges persist in the US labor market, with JOLTS Job Openings contracting. The December minutes from the Federal Open Market Committee (FOMC) indicate a cautious approach, suggesting that the policy rate may have reached its peak in the current tightening cycle.

Traders are closely watching upcoming US labor market data releases, including ADP Employment Change and Initial Jobless Claims, for further cues on the AUD/USD pair's direction.

Therefore, the positive trajectory of the US Dollar Index (DXY) and improved US Treasury yields exert upward pressure on the USD, impacting the AUD/USD pair.

Resilient Chinese Services Data Offers Hope for AUD/USD Stabilization

The AUD/USD pair faced some challenges recently, but there's a good news. China's services data improved, with the Caixin Services PMI for December going up to 52.9. This exceeded what the market expected (51.6) and the previous figure (51.5). This positive news from China could help prevent the Australian Dollar from dropping too much. Even though Australia's services sector is facing difficulties, the strong economic signs from China might help keep the AUD/USD pair steady.

Hence, the improved Chinese Services PMI, surpassing expectations, offers a ray of hope for the AUD/USD pair. This positive development may potentially mitigate losses for the Australian Dollar, as resilient Chinese economic indicators contribute to stabilizing the pair.

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

AUD/USD - Technical Anaylsis

The Australian Dollar (AUD/USD) is experiencing a slight uptick in its value, currently trading at 0.6736, indicating a 0.1% increase. As it enters Thursday's session, the currency pair faces critical technical levels. The pivot point is established at $0.6683, with immediate resistance observed at $0.6731, followed by $0.6772 and $0.6820.

Conversely, support levels are at $0.6631 and $0.6582, with a further line at $0.6861. The Relative Strength Index (RSI) sits at 39, suggesting a bearish sentiment. The MACD value is narrowly below the signal line, indicating potential shifts in momentum.

The 50-Day EMA at $0.6745 will be a key level to watch, as it may dictate short-term price movements. Overall, while the AUD/USD shows a modest gain, its trend remains cautious, with a focus on these pivotal technical levels for future direction.

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