AUD/USD Price Analysis – July 16, 2024

Daily Price Outlook

During the European trading session, the AUD/USD pair continued its bearish trend, remaining under pressure around the 0.6744 level and hitting an intraday low of 0.6732. The downward movement can be attributed to the strength of the US dollar, which gained ground despite dovish comments from Federal Reserve Chair Jerome Powell on monetary policy.

The dollar's rise was fueled by recent events, including an unsuccessful attempt on Donald Trump's life, which has boosted his prospects for the 2024 presidential election and raised expectations of fewer regulations under his potential leadership.

Moving ahead, traders will keep their eyes on Australia's June Employment data, set for release on Thursday. Economists predict around 20,000 new jobs were added, down from 39,700 in May.

The Unemployment Rate is expected to hold steady at 4.0%. Strong signs of a tight labor market could raise expectations for further tightening by the Reserve Bank of Australia (RBA). Currently, investors anticipate the RBA may follow the global trend of rate cuts next year.

Impact of US Dollar Strength on AUD/USD Amid Political and Economic Expectations

On the US front, the broad-based US dollar gained positive traction and remained bullish as the recent events, including an unsuccessful attempt on Donald Trump's life, have bolstered his prospects for winning the 2024 presidential election, sparking hopes of reduced regulations under his potential leadership.

Moreover, the US dollar has strengthened on expectations that Trump's policies could lead to higher government debt and inflation.

Therefore, the US dollar's bullish sentiment, bolstered by events like an unsuccessful attempt on Donald Trump's life and expectations of reduced regulations and higher debt, has strengthened against the Australian dollar (AUD/USD), likely pushing the pair lower amid increased risk aversion and dollar demand.

US Dollar Strength and Fed's Policy Signals Impact on AUD/USD Pair

On the US front, Federal Reserve Chair Jerome Powell's dovish comments on Monday bolstered the US dollar against the Australian dollar (AUD/USD). His confidence in inflation nearing the Fed's target sustainably has raised expectations of potential interest rate cuts. This outlook has capped gains in the US dollar, potentially helping the AUD/USD pair to limit its deeper losses.

Meanwhile, Fed Bank of San Francisco President Mary Daly highlighted a cooling inflation trend, suggesting that inflation is on track toward the Fed's 2% target.

She emphasized the importance of gathering more data before making decisions on interest rates. Market sentiment, as reflected in CME Group’s FedWatch Tool, now indicates an 85.7% probability of a 25-basis point rate cut in September, up from 71.0% reported last week.

Hence, Federal Reserve Chair Jerome Powell's dovish comments on Monday capped gains in the US dollar against the Australian dollar (AUD/USD). His confidence in inflation nearing the Fed's target sustainably has raised expectations of potential interest rate cuts, influencing the pair's movements.

AUD/USD - Technical Analysis

The Australian Dollar (AUD/USD) is currently trading at $0.67365, down 0.17% from the previous session. The 4-hour chart highlights key price levels, with the pivot point set at $0.67. Immediate resistance is observed at $0.68, followed by further resistance levels at $0.6825 and $0.6850.

On the downside, immediate support is noted at $0.6710, with additional support at $0.6690 and $0.6670.

The Relative Strength Index (RSI) stands at 30, indicating that the pair is approaching oversold conditions.

This could suggest a potential rebound if the bearish momentum begins to wane. The 50-day Exponential Moving Average (EMA) is positioned at $0.68, providing a key resistance level that the price must overcome to shift towards a more bullish outlook.

The recent decline in the AUD/USD can be attributed to a strengthening U.S. dollar, driven by positive economic data and market expectations of future interest rate hikes by the Federal Reserve.

Additionally, weaker commodity prices and concerns over China's economic slowdown have put additional pressure on the Australian Dollar, which is heavily influenced by global commodity demand.

Traders looking to capitalize on the current downtrend should consider entering short positions below $0.67468, with a take-profit target at $0.67212 and a stop-loss set at $0.67622. This strategy aims to benefit from continued bearish momentum while managing potential risks effectively.

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