AUD/USD Price Analysis – June 27, 2024

Daily Price Outlook

During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well bid around the 0.6655 level, hitting an intraday high of 0.6673. However, the reason for its upward trend can be attributed to the risk-on market sentiment, which tends to underpin risky assets like the Australian dollar, contributing to gains in the AUD/USD pair.

Meanwhile, renewed selling pressure in the US dollar was seen as another key factor that kept the AUD/USD pair higher. The US Dollar (USD) edged lower with the focus on the US core Personal Consumption Expenditure (PCE) Price Index data for May, scheduled for release on Friday.

Impact of Weakening US Dollar and Inflation Data on AUD/USD Trading Sentiment

On the US front, the broad-based US dollar lost its strength and turned bearish amid expectations of a slowdown in inflation. Investors are closely watching the US core PCE inflation data, estimated to have softened to 2.6% annually and 0.1% monthly.

Softer inflation numbers could boost hopes for early rate cuts by the Federal Reserve, while higher figures might allow the Fed to maintain current interest rates longer, supporting the US Dollar. As of now, the US Dollar Index (DXY) is near 105.90, as traders expect two rate cuts this year, potentially starting as early as September.

Therefore, the weakening US Dollar could strengthen the AUD/USD pair, as softer inflation data may increase expectations for US rate cuts, potentially benefiting the Australian Dollar against the Greenback.

Impact of Positive Global Market Sentiment on Equities and Gold Prices

Meanwhile, the global market sentiment has been showing a positive bullish trend as evidenced by the upbeat performance of the S&P 500, which hit an intraday high of 5,483.14. This was bolstered by market expectations of potential Federal Reserve rate cuts, with investors pricing in a higher likelihood of a first cut in September and possibly two cuts by year-end.

This sentiment has lifted equity markets, as lower interest rates typically support corporate earnings and economic growth, driving optimism despite lingering uncertainties in global trade and economic data. Hence, the positive sentiment was seen as a key factor that kept a AUD/USD pair higher.

Impact of Higher-than-Expected Inflation on AUD/USD and RBA Policy

On the AUD front, higher-than-expected inflation growth has raised expectations of further rate hikes by the Reserve Bank of Australia (RBA). In May, the monthly Consumer Price Index (CPI) report revealed inflation accelerating to 4.0%, driven by increased costs for fuel, food, electricity, and rentals, surpassing forecasts of 3.8% and the previous 4.0% figure.

This strong inflationary pressure suggests the RBA may lean towards tightening monetary policy to curb price increases, potentially strengthening the Australian Dollar against other currencies.

Therefore, the prospect of additional rate hikes by the RBA, fueled by higher inflation, could strengthen the AUD/USD pair as investors anticipate a more robust Australian Dollar against the US Dollar.

AUD/USD - Technical Analysis

The AUD/USD pair is currently trading at $0.66661, reflecting a 0.23% increase in the latest session. This upward movement comes amid a generally positive sentiment for the Australian dollar, supported by improved risk appetite and favorable economic indicators.

The 4-hour chart highlights a crucial pivot point at $0.6661, which serves as a key level for determining the pair's short-term direction.

The Relative Strength Index (RSI) is currently at 56, indicating a moderately bullish sentiment without reaching overbought conditions. This suggests there is room for further gains. The 50-day Exponential Moving Average (EMA) is positioned at $0.6653, providing a supportive level that reinforces the ongoing upward trend.

Immediate resistance levels are identified at $0.6690 and $0.6704, which could pose challenges to further upward movement. Conversely, immediate support is seen at $0.6640, followed by $0.6626.

Given the current technical setup, a buy limit order at $0.66541 is recommended, with a take profit target at $0.66823 and a stop loss at $0.66371.

Related News

- GOLD Price Analysis – June 27, 2024

- USD/JPY Price Analysis – June 27, 2024

- AUD/USD Price Analysis – June 25, 2024