Technical Analysis

AUD/USD Price Analysis – May 28, 2024

By LonghornFX Technical Analysis
May 28, 20244 min

Daily Price Outlook

Despite the hawkish Fed minutes and stronger US economic data, the AUD/USD currency pair maintained its upward trend and remained well bid around the 0.6666 level, hitting an intraday high of 0.6674.

However, the reason for its upward trend could be attributed to the risk-on market sentiment, supported by the upbeat US economic data. This was evident with April's Durable Goods Orders, showing a solid recovery with a 0.7% month-over-month increase, compared to the forecasted 0.8% decline.

On the other hand, the US Dollar lost traction despite upbeat US data and hawkish remarks by the Fed, due to lower US Treasury yields. Hence, the bearish US dollar was seen as another key factor that kept the AUD/USD pair higher.

In contrast, the lower-than-expected growth in Australia's April Retail Sales, coupled with a previous decline, might weigh on the AUD currency, suggesting potential challenges for the country's economic recovery.

US Dollar Weakens Amid Mixed Signals; Impact on AUD/USD Pair

On the US front, the broad-based US dollar is losing ground due to declining Treasury yields. However, the probability of a September rate cut by the Federal Reserve has decreased to 44.9%.

Fed officials, including Michelle Bowman and Loretta Mester, are scheduled to speak this week. Mester emphasizes the need for clearer economic assessments in Fed statements, while Bowman stresses the importance of shrinking the balance sheet, especially during economic strength.

On the data front, the University of Michigan's Consumer Inflation Expectations for May eased slightly to 3.0%. The Consumer Sentiment Index rose to 69.1 but remains the lowest in six months.

Durable Goods Orders for April increased by 0.7%, contrasting with the forecasted decline of 0.8%, though March's figure was revised down to 0.8% from the initial 2.6%.

Therefore, the weakening dollar, reduced rate cut odds, and positive economic data support the AUD/USD pair. However, lingering economic uncertainties and Fed policy adjustments could introduce volatility.

AUD's Strength and China's Economic Measures Support AUD/USD Pair

On the AUD front, the uptick in the AUD/USD pair is further bolstered by an improved risk appetite. The latest Reserve Bank of Australia (RBA) meeting minutes indicate uncertainty in predicting future cash rate changes, with recent data suggesting inflation may stay above the 2-3% target for a while.

On the China front, Shanghai has announced support measures for the property sector. They're cutting down payment requirements and lowering mortgage rates. Plus, China launched a huge $47 billion fund to boost its semiconductor industry. This could affect Australia because they're closely tied in trade.

Therefore, the AUD/USD pair is further supported by the AUD's strength due to improved risk appetite and uncertainty in future cash rate changes, along with China's measures to stimulate its economy.

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

AUD/USD - Technical Analysis

The AUD/USD pair is trading at $0.66583, showing a 0.24% increase on the 4-hour chart. The pivot point, marked at $0.6669, is crucial for determining the market direction. Immediate resistance levels are $0.6684, $0.6711, and $0.6731. On the downside, immediate support is identified at $0.6638, followed by $0.6617 and $0.6595.

The Relative Strength Index (RSI) stands at 57, indicating moderate bullish momentum. The 50-day Exponential Moving Average (EMA) is positioned at $0.6654, suggesting that the current price is slightly above this short-term average, reinforcing a bullish outlook.

The outlook for AUD/USD remains slightly bullish above the pivot point of $0.6669. Traders may consider selling below $0.66691, with a take profit target at $0.66371 and a stop loss at $0.66844.

The technical landscape suggests that AUD/USD is experiencing moderate bullish momentum, with the RSI at 57 supporting this outlook. The price above the 50-day EMA at $0.6654 adds to the bullish sentiment.

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