Daily Price Outlook
Despite the decline in Employment Change and the bullish US dollar, the AUD/USD currency pair maintained its bullish bias and remained well bid around the 0.6564 level. The upward trend can be attributed to the stability in Australian Consumer Inflation Expectations and the Unemployment Rate meeting expectations, providing some relief to the Australian dollar. In contrast to this, the US military's execution of another series of strikes on Houthi targets in Yemen heightened geopolitical tensions, bolstering the risk-off market sentiment and undermining the riskier Australian dollar. This was seen as a key factor that kept a lid on any additional gains in the AUD/USD pair.
Australian Economic Indicators and Mixed Chinese Data
It's worth noting that Australia's recent economic data failed to give much support to the Australian Dollar. In January, Consumer Inflation Expectations and the Unemployment Rate held steady, but Employment Change took a hit, falling by 65.1K instead of the expected increase of 17.6K. Additionally, Consumer Confidence dropped by 1.3%, contrasting with the previous 2.7% rise. On a positive note, Australian TD Securities inflation rose to 5.2% YoY in December.
Meanwhile, China's economic indicators showed mixed results. Annual GDP growth was 5.2%, slightly below the expected 5.3%. Industrial Production beat expectations at 6.8%, but Retail Sales fell short at 7.4% YoY. Premier Li Qiang mentioned that China's economy grew around 5.2% in 2023.
Therefore, Australia's weak economic data, coupled with China's mixed indicators, may pressure the AUD/USD pair as the declining employment and consumer confidence in Australia, along with China's slightly below-expected GDP, could weigh on the Australian Dollar.
Factors Influencing the US Dollar and Pressuring the AUD/USD Pair
In addition, the US Dollar Index (DXY) retreated from a five-week high at 103.69 due to lower US Treasury yields following Wednesday's economic data. US Retail Sales in December surpassed expectations, registering a 0.6% increase. The positive momentum extended to the Retail Sales Control Group, which rose by 0.8%, and Retail Sales excluding Autos, growing by 0.4% and surpassing the anticipated 0.2%.
Investor sentiment favored the US Dollar, decreasing the probability of a March rate cut by the Federal Reserve from over 70% to 57%. Federal Reserve officials, including Christopher Waller and Raphael Bostic, underscored the importance of caution and cautioned against premature rate cuts. Additionally, the US NY Empire State Manufacturing Index dropped to -43.7 in January, falling short of expectations.
Therefore, the positive US economic data, lower chance of a March rate cut, and caution from Federal Reserve officials strengthened the US Dollar. This likely pressured the AUD/USD pair, causing a potential decline.
AUD/USD - Technical Anaylsis
As of January 18, the AUD/USD pair has shown a slight uptick, currently trading at 0.65488, marking a 0.10% increase. On a 4-hour chart, the currency pair presents a pivot point at 0.6557. Looking ahead, AUD/USD faces immediate resistance at 0.6600, with subsequent levels at 0.6645 and 0.6689. Conversely, support is found at 0.6510, followed by 0.6464 and 0.6730.
The Relative Strength Index (RSI) stands at 30, suggesting the pair may be entering an oversold territory, potentially leading to a bounce. The Moving Average Convergence Divergence (MACD) shows a value of -0.0002 with a signal line at -0.0036, hinting at possible downward momentum. However, the pair needs to break past key levels for a clearer direction.
The 50-Day Exponential Moving Average (EMA) is currently positioned at 0.6566, hovering near the pair’s current trading level and might act as a dynamic resistance. A notable chart pattern for AUD/USD is the double bottom support around the 0.6530 level, suggesting potential for a reversal if the pair holds this support.
The overall trend for AUD/USD appears to be in a crucial phase. For traders, a potential entry point could be at a buy limit of 0.65302, with a take-profit target set at 0.65981 and a stop loss at 0.64956. In the short term, the currency pair is expected to test its resistance levels, particularly if it surpasses its immediate pivot point.
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