Technical Analysis

AUD/USD Price Analysis – March 19, 2024

By LonghornFX Technical Analysis
Mar 19, 20244 min

Daily Price Outlook

Despite the risk-on market sentiment, the AUD/USD currency pair failed to stop its downward trend and remained under pressure due to the combination of negative factors, including the performance of domestic equity markets which experience thin trading activity due to market caution. However, the reason for its downward trend can also be attributed to the bullish US dollar, which has been gaining support on the back of the Fed's hawkish outlook. This signals confidence in a stronger US economy, which can lead to increased investment and optimism among traders and investors, positively impacting market sentiment.

Australian Economic Outlook and Impact on AUD/USD Pair

On the Australian front, the benchmark S&P/ASX 200 Index maintained its upward trend, which was driven by gains in energy and real estate sectors. This uptick in the stock market lend some support to the Australian Dollar (AUD). However, Australia's economy grew less than expected in Q4 2023, sparking speculation about potential rate cuts by the Reserve Bank of Australia later this year.

On the data front, the ANZ-Roy Morgan Australian Consumer Confidence index dipped slightly to 81.7, with Westpac predicting the central bank will likely keep its cash rate steady at 4.35%. ANZ Bank analysts foresee the Reserve Bank of Australia maintaining a cautious stance, although no interest rate adjustments are anticipated.

Therefore, the rise in the S&P/ASX 200 Index support the AUD, but concerns about Australia's economic growth and potential rate cuts could weigh on sentiment.

Chinese Economic Resilience and Impact on AUD/USD Pair

Another factor that could boost the AUD/USD pair was the positive Retail Sales and Industrial Production figures from China, which signal resilience in its economy, boosting global sentiment. This could indirectly benefit the AUD/USD pair, as Australia's economy heavily relies on Chinese demand for its exports, potentially strengthening the Australian Dollar against the US Dollar.

On the China data front, Retail Sales in February surpassed expectations, growing by 5.5% year-on-year, higher than the anticipated 5.2% and the previous 7.4%. Meanwhile, Industrial Production also exceeded forecasts, rising by 7.0% year-on-year, compared to the expected 5.0% and the prior 6.8%. These positive figures indicate resilience in the world's second-largest economy, suggesting potential support for global sentiment.

US Economic Update and Impact on AUD/USD Pair

On the US front, the upward trend 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. However, the probability of a rate cut in March is low at 1.0%, increasing to 8.7% in May.

On the data front, the US Michigan Consumer Sentiment Index for March declined to 76.5 from 76.9, defying expectations of no change. Industrial Production edged up by 0.1% in February, contrary to the expected flat reading, but an improvement from the previous month's decline. The Core Producer Price Index held steady at 2.0% year-over-year in February, exceeding the expected 1.9%. US PPI rose by 1.6% year-over-year and 0.6% month-over-month, surpassing forecasts, suggesting heightened inflationary pressures. Therefore, the strengthening US dollar, supported by a hawkish Fed outlook, may limit gains for the AUD/USD pair.

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

AUD/USD - Technical Analysis

The AUD/USD pair faced a downturn, marking a 0.44% decrease to 0.65217. This movement places the pair in a delicate position as it navigates through significant technical levels. The currency faces its pivot point at 0.6551, suggesting a critical juncture for future price action. Resistance levels are staged at 0.6573, 0.6596, and 0.6624, providing potential barriers to upward movements. Conversely, immediate support at 0.6520, followed by further supports at 0.6479 and 0.6450, illustrates key levels where the pair might find a floor.

The technical outlook is further compounded by an RSI indicator at 26, indicating a strong bearish momentum and potential overselling conditions. The appearance of a bearish engulfing candlestick pattern below the 0.6550 level underscores the selling pressure, suggesting the likelihood of a continued downtrend. Additionally, the 50-day EMA at 0.6574 acts as a near-term resistance level, reinforcing the bearish outlook.

Given these conditions, a cautious approach is recommended for traders, with a proposed sell entry below 0.65368. The suggested take profit level at 0.64828 and a stop loss at 0.65718 aim to manage risk while capitalizing on the pair's current bearish trend.

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