Technical Analysis

AUD/USD Price Analysis – March 26, 2024

By LonghornFX Technical Analysis
Mar 26, 20245 min

Daily Price Outlook

The AUD/USD currency pair has maintained its upward trend and still showing bullish performance around 0.6550 level. However, the reason for its upward trend can be attributed to the decline in the US dollar, as evidenced by the struggles of the US Dollar Index (DXY) over consecutive days. This weakening of the Greenback has provided support to the AUD/USD pair, contributing to its upward momentum.

Furthermore, the Australian equity market's positive performance has also played a role in bolstering the Australian Dollar. Despite modest weakness in Wall Street, the ASX 200 Index has extended its winning streak, indicating investor confidence in the Australian economy. This optimism in the equity market has spilled over into the currency markets, providing strength to the Aussie Dollar.

Moreover, Australia's government has pledged to support a minimum wage increase aligned with inflation, addressing the concerns of low-income families amidst rising living costs. This commitment to supporting the economy has further boosted confidence in the Australian Dollar, contributing to its bullish performance against the US Dollar.

In contrast to this, Australian Dollar faced slight downward pressure following the release of Australia's Westpac Consumer Confidence data, which dipped 1.8% to 84.4 in March 2024 from February's 86.0, easing from 20-month highs. However, the overall bullish sentiment surrounding the AUD/USD pair persisted, supported by factors such as improved market sentiment and a positive outlook for the Australian equity market.

Australian Equity Market Gains and its Impact on AUD/USD Currency Pair

As mentioned earlier, the Australian equity market experienced gains, contributing to the strength of the Australian Dollar and impacting the AUD/USD currency pair. However, the expectations of a rate cut by the Reserve Bank of Australia (RBA), driven by a decline in Aussie consumer confidence, bolstered investor sentiment. Despite modest weakness on Wall Street overnight, the ASX 200 Index extended its winning streak, providing a favorable environment for the Australian Dollar.

Investors monitored the release of Australia's monthly Consumer Price Index (CPI) data, scheduled for Wednesday, for further insights into the economic landscape and potential monetary policy adjustments by the RBA. The government's commitment to supporting a minimum wage increase aligned with inflation also underscored efforts to address challenges faced by low-income families amid rising living costs, fostering positive sentiment towards the Australian economy and its currency.

Federal Reserve Rate Cut Expectations and Impact on AUD/USD Currency Pair

On the US front, the Federal Reserve's expectation of rate cut cycle, coupled with previously released downbeat US economic data, influenced the AUD/USD currency pair. On the data front, US New Home Sales Change declined by 0.3% month-over-month, falling short of expectations, while S&P Global Services PMI showed a slight decrease in March. These figures indicated challenges in the US economic recovery, adding pressure on the dollar and boosting the AUD/USD currency pair.

Atlanta Fed President Raphael Bostic expressed a conservative outlook, expecting just one rate cut this year to avoid premature disruptions. In contrast, Chicago Fed President Austan Goolsbee aligned with the majority of the board, anticipating three cuts but emphasizing the need for additional evidence of decreasing inflation. Hence, the divergence in views within the Fed contributed to market uncertainty but provided support for the AUD/USD pair amid expectations of accommodative monetary policy.

Bloomberg Survey on PBoC's RRR Cuts and Impact on AUD/USD Currency Pair

According to economists surveyed by Bloomberg, they predict that the People's Bank of China (PBoC) will make two more cuts to the Reserve Requirement Ratio (RRR) in 2024, totaling a 50 basis point reduction. This means the PBoC will require banks to hold less money in reserve, aiming to boost economic growth and increase available funds in China. This move could indirectly help Australia's economy because of its strong trade relationship with China, possibly leading to a stronger AUD/USD currency pair.

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

AUD/USD - Technical Analysis

The Australian Dollar (AUD/USD) holds steady in today's trading, showing a negligible decline to a rate of 0.65367. In the broader context, this movement reflects the nuanced interplay of economic indicators, market sentiment, and global financial dynamics influencing the currency pair.

A detailed technical analysis reveals that AUD/USD is operating just below the pivot point of 0.6555, indicating a potential inflection in market direction. Resistance levels are poised at 0.6593, 0.6626, and 0.6667, delineating clear barriers to upward momentum. Conversely, immediate support lies at 0.6512, with further floors at 0.6478 and 0.6448, which could offer rebound opportunities. The Relative Strength Index (RSI) standing at 46 suggests a slightly bearish sentiment, yet not deeply entrenched in oversold territory. The 50-Day Exponential Moving Average (EMA) closely mirrors the pivot point at 0.6554, suggesting a near equilibrium between buying and selling forces.

Given these observations, the recommended strategy involves placing a sell limit at 0.65552, with a target for taking profit at 0.65102, and a stop loss set at 0.65927. This tactical approach capitalizes on the AUD/USD's current stability, leveraging minor fluctuations for potential gains, whilst mindful of the currency pair's sensitivity to shifts in economic reports and geopolitical events.

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