Technical Analysis

AUD/USD Price Analysis – July 09, 2024

By LonghornFX Technical Analysis
Jul 9, 20244 min

Daily Price Outlook

During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well-bid around the 0.6738 level, hitting an intraday high of 0.6748.

The upward trend can be attributed to several factors, including rising expectations that the Reserve Bank of Australia (RBA) might raise interest rates again, spurred by strong inflation data for May. This has bolstered the AUD currency and contributed to gains in the AUD/USD pair.

Additionally, the upticks in the AUD/USD pair were further supported by weakness in the US dollar, which lost ground following soft US employment data. This has led traders to speculate that the Federal Reserve (Fed) might reduce interest rates sooner rather than later.

Impact of RBA Policy and Economic Indicators on AUD/USD Pair

On the AUD front, the currency's recent strength is linked to expectations that the Reserve Bank of Australia (RBA) may delay joining global rate cuts or even consider raising rates again, buoyed by strong May inflation figures.

Australia's 10-year government bond yield holding steady around 4.4% has also attracted foreign investment seeking stability amidst political uncertainties in the US and Europe.

The RBA's June Meeting Minutes highlighted their focus on monitoring inflation risks, noting that a significant price increase could necessitate much higher interest rates in response. These factors combined have supported the AUD's upward momentum against major currencies like the USD.

On the data front, Australia's Westpac Consumer Confidence dropped by 1.1% in July, reversing June's 1.7% increase, marking the fifth decline in 2024. This decline reflects ongoing concerns over high inflation, elevated interest rates, and a slow economy.

According to the Australian Bureau of Statistics, the country's trade surplus for May came in at A$5,773 million ($3,868 million), below expectations of A$6,678 million and down from A$6,548 million previously.

On a positive note, Australia's Retail Sales rose by 0.6% month-on-month in May, surpassing expectations of a 0.2% increase, indicating a stronger level of consumer spending compared to the previous month.

Therefore, the AUD's recent strength, bolstered by potential RBA rate stance and strong inflation data, has lifted it against the USD. Consumer confidence and trade surplus data, however, reflect mixed economic sentiment impacting AUD/USD trends.

Impact of US Economic Data and Fed Speculations on AUD/USD Pair

On the US front, the broad-based US dollar is losing momentum as soft employment data fuels speculation of earlier rate cuts by the Federal Reserve (Fed). Traders are now pricing in a 76.2% probability of a rate cut in September, up from 65.5% last week, according to the CME's FedWatch Tool.

Federal Reserve Chair Jerome Powell is scheduled to testify on the economy and monetary policy to Congress, where his remarks could influence market expectations.

Meanwhile, Federal Reserve Bank of Chicago President Austan Goolsbee remarked on the challenge of returning inflation to 2%, while Powell indicated the Fed's commitment to addressing disinflationary pressures.

On the data front, US Nonfarm Payrolls rose by 206,000 in June, exceeding expectations of 190,000, following a gain of 218,000 in May. The Unemployment Rate ticked up to 4.1% from May's 4.0%, while Average Hourly Earnings decreased to a 3.9% year-over-year growth rate in June, aligning with market forecasts.

Therefore, the AUD/USD pair could see upward pressure as the US dollar weakens on speculation of earlier Fed rate cuts due to softer employment data, increasing the likelihood of a stronger Australian dollar against the USD.

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

AUD/USD - Technical Analysis

The AUD/USD is currently trading at $0.67361 on the 2-hour chart. The pivot point is positioned at $0.67207 (Green line). Immediate resistance is observed at $0.67515, with further resistance at $0.67670 and $0.67867.

On the downside, immediate support is located at $0.67221, followed by $0.67029 and $0.66821. The 50-day Exponential Moving Average (EMA) is positioned at $0.67207, acting as a significant level for potential upward or downward movements.

The Relative Strength Index (RSI) is currently at 59.96, indicating a neutral to slightly bullish market sentiment.

This level suggests a balanced market, with potential for upward movements if the RSI increases further. The 50-day EMA at $0.67207 aligns closely with the current price, providing a crucial pivot point for traders to watch.

For traders, a strategic entry point is recommended above $0.67221, with a take profit level set at $0.67670 and a stop loss at $0.67029. Maintaining prices above the pivot point of $0.67207 could indicate a bullish trend continuation, whereas a move below this level might suggest a bearish reversal.

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