AUD/USD Price Analysis – March 14, 2024

Daily Price Outlook

The AUD/USD currency pair remains under pressure amidst a combination of factors, including the performance of domestic equity markets, Australian economic indicators, and expectations regarding US monetary policy. Meanwhile, the decrease in the NAB Business Confidence Index exert some downward pressure on the AUD/USD pair, but the improvement in the NAB Business Conditions Index could offset this effect to some extent. Traders are closely monitoring developments in economic data releases, central bank announcements, and geopolitical events for further insights into the currency pair's direction.

Although, the losses in the AUD/USD currency pair could be short-lived as the Reserve Bank of Australia (RBA) continues to suggest it may need to raise rates even further. Philip Lowe's statement, along with Michelle Bullock's warning, suggesting potential interest rate increases, could bolster confidence in the Australian dollar, potentially leading to a positive impact on the AUD/USD pair.

Furthermore, the meeting between Wang Yi and Penny Wong could positively impact the AUD/USD pair if discussions lead to progress on economic cooperation, particularly the removal of trade barriers. However, sensitive issues like human rights and regional security could introduce uncertainty, affecting the currency pair negatively.

Australian Economic Data and Central Bank Commentary Impact on AUD/USD Pair

On the data front, Australia's NAB Business Confidence Index dipped to 0 in February, down from 1 in the prior month. This suggests a stall in business sentiment. However, there's a brighter note as the NAB Business Conditions Index rose to 10 from the revised reading of 7 (initially 6). This indicates improved business conditions, likely driven by factors such as economic recovery efforts and increased consumer spending. While the drop in confidence might raise concerns, the uptick in business conditions could provide some reassurance and potentially support economic growth moving forward.

It is worth noting that the Former RBA Governor Philip Lowe stated that there is a two-way risk on interest rates, indicating that rates could either rise or fall. This statement, coupled with current RBA Governor Michelle Bullock's warning that rates might need to increase, suggests a potential strengthening of the Australian dollar (AUD) against the US dollar (USD). If the RBA raises interest rates, it could attract foreign investors seeking higher returns, leading to an increased demand for the AUD. This increased demand could drive up the value of the AUD relative to the USD, making it more positive for the AUD/USD currency pair.

Prospects of Improved Trade Relations Between Australia and China Boost AUD/USD Pair

Another factor that could boost the AUD/USD pair was the upcoming meeting between Chinese Foreign Minister Wang Yi and Australia's Foreign Affairs Minister Penny Wong. The discussions are expected to include economic issues such as the removal of trade barriers, which could benefit both countries and contribute to increased trade activity.

This prospect of improved trade relations between Australia and China could positively impact the Australian dollar (AUD) due to increased demand for Australian exports, potentially strengthening the currency against the US dollar (USD). Additionally, positive outcomes from the meeting may instill confidence in the market, further supporting the AUD/USD pair.

US Dollar Strength and Economic Data Impact on AUD/USD Pair

On the US front, the bullish bias in the US dollar, backed by the hawkish Fed outlook, was seen as a key factor that could cap gains in the AUD/USD pair. Meanwhile, Yellen's cautious outlook on interest rates could bolster the US dollar against the Australian dollar (AUD), as it suggests potential for higher rates. This could attract investors to the USD, diminishing demand for the AUD and weakening the AUD/USD pair. Confidence in fiscal planning assumptions may also influence currency sentiment.

On the data front, US Consumer Price Index (CPI) figures for February showed a year-over-year increase of 3.2%, surpassing estimates and indicating rising inflation. The monthly index met expectations at 0.4%, signaling a consistent trend. Core CPI, excluding volatile food and energy prices, rose 3.8% year-over-year, slightly above expectations. However, the Monthly Budget Statement revealed a deficit of $296 billion in February, lower than expected but significantly higher than the previous month.

AUD/USD - Technical Analysis

On March 14, the AUD/USD pair slightly retreated, marking a 0.10% decrease to close at 0.66152. This movement reflects the pair's sensitivity to the latest economic data and shifts in market sentiment.

The technical landscape for AUD/USD is characterized by a mix of bullish and bearish signals. The pair's current position below the pivot point at 0.6658 suggests a cautious market outlook. Immediate resistance levels are located at 0.6668, 0.6698, and 0.6724, which could limit upward moves. On the downside, support is found at 0.6595, followed by 0.6573 and 0.6550, offering potential rebound points.

Technical indicators provide a nuanced view of the pair's future direction. The Relative Strength Index (RSI) stands at 55, indicating a slight bias towards buying pressure, while the 50-day Exponential Moving Average (EMA) at 0.6590 underscores a general uptrend. However, the presence of a double top formation near $0.6640 and a bearish engulfing candle on the 4-hour chart warn of possible selling activity ahead.

Considering these factors, the AUD/USD outlook suggests a cautiously optimistic trend with a recommendation for a buying strategy above 0.66035. Setting a take-profit at 0.66580 and a stop loss at 0.65733 could capitalize on the pair's current momentum while mitigating risks associated with potential downward corrections.

Related News

- GOLD Price Analysis – March 14, 2024

- USD/JPY Price Analysis – March 14, 2024

- AUD/USD Price Analysis – March 12, 2024