Technical Analysis

AUD/USD Price Analysis – May 30, 2024

By LonghornFX Technical Analysis
May 30, 20244 min

Daily Price Outlook

During the European trading session, the AUD/USD currency pair was able to stop its previous bearish trend and regained its strength around the 0.6623 level, hitting an intra-day high of 0.6623.

The bullish performance was driven by several favorable factors, including the increase in the Australian 10-year Government Bond Yield, which has reached a four-week high of 4.52%.

This rise in yield signals to investors that the Reserve Bank of Australia (RBA) may maintain higher interest rates for a longer period, enhancing the attractiveness of Australian assets.

Furthermore, the previously released upbeat Australian economic data has bolstered the AUD. Australia’s Monthly Consumer Price Index (CPI) showed robust figures, prompting speculation about another potential rate hike by the RBA.

Additionally, Australia's Private Capital Expenditure increased by 1.0% in Q1, surpassing expectations and reflecting positive business investment trends.

Moreover, China, a significant trading partner for Australia, has lifted bans on beef shipments from five major Australian meat producers. This development is likely to boost Australia's export revenues and, in turn, support the Australian Dollar and contributed to the AUD/USD pair gains.

Australia's 10-Year Government Bond Yield Reaches a Four-Week High

It should be noted that Australian 10-year Government Bond Yield hitting a four-week high of 4.52% is a noteworthy event impacting the AUD/USD pair. This increase in bond yield indicates stronger investor confidence in the Australian economy and expectations that the RBA might maintain a tighter monetary policy to combat inflation.

However, the higher bond yields often attract foreign investment, thereby increasing demand for the Australian Dollar.

Meanwhile, the recent data releases have also played a major role in this sentiment. The robust Monthly CPI figures suggest persistent inflationary pressures, which the RBA is closely monitoring.

The RBA's May policy meeting minutes revealed that the central bank had considered an interest rate increase, highlighting its commitment to keeping inflation within the target range.

This stance is likely to support the AUD by suggesting that higher interest rates might prevail, making Australian assets more attractive to investors.

Steady US Dollar: Hawkish Fed Comments and Its Impact on AUD/USD

On the US front, the US Dollar has remained steady, buoyed by hawkish comments from Federal Reserve officials, which has influenced the AUD/USD pair. Fed officials have noted that achieving 2% inflation is still challenging and that ongoing inflation requires a cautious approach to monetary policy.

For example, Atlanta Fed President Raphael Bostic highlighted widespread price gains, and Minneapolis Fed President Neel Kashkari mentioned possible future rate hikes, showing the Fed's vigilance.

However, the US Dollar Index (DXY), which measures the USD against six major currencies, trades higher around 105.10, supported by risk aversion sentiment.

This stability in the USD, coupled with high US Treasury yields, has placed downward pressure on the AUD/USD pair. Despite this, the Australian Dollar has shown resilience due to domestic economic strengths and positive developments with China.

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

AUD/USD - Technical Analysis

AUD/USD is currently trading at $0.65962, reflecting a slight decline of 0.04%. The pivot point at $0.6598 is a critical level for gauging the next market direction. Immediate resistance is noted at $0.6620, with further resistance at $0.6639 and $0.6671.

These levels are pivotal as they could signal potential upward movements if the price breaches them. Conversely, immediate support is found at $0.6580, followed by $0.6558 and $0.6543, which could indicate further declines if the price drops below these levels.

Technical indicators show the Relative Strength Index (RSI) at 32, indicating that the currency pair is nearing oversold conditions. The 50-day Exponential Moving Average (EMA) is positioned at $0.6643, suggesting potential resistance if the price attempts a rebound.

Given the current market dynamics, the outlook for AUD/USD remains bearish below the pivot point of $0.6598.

The strategy for traders would be to consider selling below $0.66126, with a take profit target at $0.65797 and a stop loss at $0.66330. This approach capitalizes on the downward momentum while safeguarding against potential rebounds.

The economic backdrop, including weaker commodity prices and domestic economic concerns, continues to weigh on the Australian dollar. Additionally, the stronger US dollar, bolstered by higher yields and positive economic data, adds further pressure on the AUD/USD pair.

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