AUD/USD Price Analysis – July 25, 2024

Daily Price Outlook

During the European trading session, the AUD/USD currency pair failed to stop its downward trend and remained well offered around the 0.6527 level, hitting an intra-day low of 0.6519.

The downward rally can be attributed to the weak economic outlooks for China and Australia, which have dampened the Australian dollar and contributed to the AUD/USD pair's losses.

In contrast, the bearish US dollar, driven by increasing expectations that the Federal Reserve (Fed) will cut interest rates multiple times before the year's end, has helped the AUD/USD pair to limit its losses.

Australian Dollar Under Pressure from China’s Economic Slowdown and Weak Market Sentiment

On the AUD front, The Australian Dollar (AUD) is under pressure due to concerns about China's economic slowdown. China's recent decision to cut its Loan Prime Rate (LPR) by 10 basis points, coupled with a lack of strong growth measures, has raised fears about the country's economic health.

This is significant for Australia, as the AUD often mirrors China's economic conditions and Australia heavily depends on iron ore exports to China.

With global iron ore prices falling to a three-week low and anticipated declines in foreign investment in Australia, the AUD faces further challenges. Additionally, weak market sentiment before the US Q2 GDP report and nominal losses in S&P 500 futures compound the AUD's difficulties.

Impact of US Economic Data and Outlook on AUD/USD

On the US front, the US Dollar is falling but remains above the key support level of 104.00. However, the US economy is growing at a solid 2.0% annual rate, up from the previous 1.4%, although the GDP Price Index has slowed to 3.6% from 3.1%. This could lead to early rate cuts by the Federal Reserve.

It should be noted that the recent S&P Global PMI data for July is somewhat positive, suggesting that the economy is doing well with controlled inflation, though rising costs for materials and labor might impact prices and profit margins.

Despite the expectation of Fed rate cuts, gold prices are declining due to a stronger economic outlook and higher production costs.

The S&P Global Composite PMI improved to 55, showing overall growth, while the Manufacturing PMI fell to 49.5, indicating slower manufacturing, and the Services PMI rose to 56.0, reflecting stronger growth in services.

Therefore, the Australian Dollar (AUD) may weaken against the US Dollar (USD) as improved US economic data and a stronger outlook overshadow expectations of Fed rate cuts, impacting AUD/USD negatively.

AUD/USD - Technical Analysis

The Australian dollar (AUD/USD) declined by 0.48%, settling at $0.65453 in recent trading sessions. This downward movement places the currency pair in a delicate position as it hovers near significant technical levels. Traders and analysts are keenly observing these levels to gauge potential future movements.

The pivot point at $0.6517 is a critical marker for traders. Immediate resistance is seen at $0.6592. A break above this could push the AUD/USD towards the next resistance levels at $0.6636 and $0.6682.

On the downside, the immediate support lies at $0.6517. Further declines could find additional support at $0.6491 and $0.6465, which are vital for preventing a deeper sell-off.

Technical indicators offer a mixed outlook. The Relative Strength Index (RSI) is notably low at 19, suggesting that the AUD/USD is in oversold territory. This could imply a potential reversal or a consolidation phase in the near term as the market corrects the oversold conditions.

The 50-day Exponential Moving Average (EMA) stands at $0.6683, indicating a bearish trend as the current price remains well below this level. A sustained move below the 50 EMA often signals continued downward momentum, adding pressure on the AUD/USD.

In conclusion, the recommendation is to consider short positions below $0.65580, targeting $0.65166 for profit-taking with a stop loss set at $0.65828.

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