AUD/USD Price Analysis – Nov 05, 2024

Daily Price Outlook

Despite the risk-off market sentiment, the AUD/USD currency pair maintained its upward momentum, trading well-bid near the 0.6623 mark and reaching an intra-day high of 0.6623. However, the latest uptick followed the release of improved Purchasing Managers Index (PMI) data on Tuesday.

Meanwhile, the Reserve Bank of Australia (RBA) opted to keep the Official Cash Rate (OCR) steady at 4.35% for the eighth consecutive time in November. The central bank is widely expected to maintain this rate in the coming months, supporting the Australian dollar.

Conversely, the US dollar weakened amid uncertainty surrounding the ongoing US presidential election. This factor further bolstered the AUD/USD pair. Moving ahead, Investors are closely watching the election outcome as former President Donald Trump and Vice President Kamala Harris expressed confidence in their campaigns, making final pushes across Pennsylvania on Monday.

Australian Dollar Strengthens Amid Positive Economic Data and US Election Uncertainty

As we mentioned, the Australian Dollar is gaining traction, thanks to better Purchasing Managers Index (PMI) data released on Tuesday. In the meantime, the Reserve Bank of Australia (RBA) has decided to keep the Official Cash Rate (OCR) steady at 4.35%, marking the eighth straight month of maintaining this rate.

However, the central bank is expected to continue this approach after their policy meeting. RBA Governor Michele Bullock highlighted the importance of keeping interest rates high for now because of ongoing inflation risks.

On the data front, Australia's Judo Bank Services PMI improved to 51.0 in October, up from 50.6 in September, indicating better performance than expected. The Composite PMI also increased to 50.2, compared to 49.8 earlier. Additionally, Australia's Producer Price Index (PPI) rose by 0.9% in the third quarter, following a 1.0% increase in the previous quarter and beating forecasts of a 0.7% rise.

This marks the 17th straight period of producer inflation, though annual PPI growth slowed to 3.9% in Q3, down from 4.8% last quarter. Meanwhile, China’s Caixin Services PMI rose to 52.0 in October from 50.3 in September.

Therefore, the AUD/USD pair is likely to strengthen as solid PMI data supports the Australian dollar, while uncertainty surrounding the US presidential election weighs on the US dollar. Investors may favor the AUD amidst stable rates and positive economic indicators.

Impact of US Election Uncertainty and Fed Rate Cut on AUD/USD Pair

On the US front, the broad-based US dollar struggled on Tuesday and turned bearish due to uncertainty surrounding the upcoming presidential election. However, the opinion polls show that Trump and Harris are almost tied, and the final results may take days to determine after the vote.

Trump has indicated that he may contest any unfavorable outcomes, similar to his actions in 2020. This election uncertainty contributed to the dollar's weakness, especially after a poll showed Kamala Harris leading Trump 47% to 44% in Iowa.

In addition to the election, investors are closely watching the US Federal Reserve's policy decision expected on Thursday, with markets anticipating a modest 25 basis point rate cut. The CME FedWatch Tool shows a 99.5% chance of this rate cut happening in November.

Meanwhile, the TD-MI Inflation Gauge rose by 0.3% month-over-month in October, up from 0.1% the previous month, marking the highest reading since July. Annually, the gauge increased to 3.0% from 2.6%. Furthermore, the US Bureau of Labor Statistics reported that October's Nonfarm Payrolls only increased by 12,000, far below expectations, while the Unemployment Rate held steady at 4.1%.

Therefore, the uncertainty from the US election and anticipated Fed rate cut may weaken the US dollar, potentially boosting the AUD/USD pair.

AUD/USD – Technical Analysis

The Australian dollar (AUD/USD) is trading at $0.66140, up 0.46% on the day, reflecting a cautiously optimistic sentiment as it approaches a critical pivot at $0.66189. This level is shaping up as a short-term benchmark for the pair, with technical indicators leaning towards bullish potential. The Relative Strength Index (RSI) stands at 65, suggesting some upward momentum but nearing the overbought zone, signaling possible resistance ahead.

Immediate resistance is located at $0.66332, followed by further hurdles at $0.66486. A sustained break above these levels would signal a strengthening bullish trend, setting the stage for an advance. However, the 50-day Exponential Moving Average (EMA) at $0.65869 acts as a lower boundary of support, reinforcing a bullish outlook as long as prices hold above it.

On the downside, support is established at $0.65800, with additional floors at $0.65654 and $0.65464. These levels should serve as safety nets for bullish traders, as a break below $0.65800 could expose the pair to further declines. For now, the trend remains positive, with an entry strategy above $0.66003, targeting $0.66300 while managing downside risk with a stop loss at $0.65842.

The overall picture favors a short-term buying strategy given the strength of key support levels and upward momentum indicators. Traders should watch for a breakout above immediate resistance to confirm further gains.

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