Daily Price Outlook
Despite the dovish rate statement from the Reserve Bank of Australia (RBA), the AUD/USD currency pair managed to break a three-day declining streak and gained some positive momentum around above 0.6400 level. However, the reason for its upward trend can be attributed to the weaker US Dollar, which is possibly a result of the sluggish performance of US Treasury yields.
On the flip side, the Reserve Bank of Australia (RBA) issued a dovish statement regarding interest rates, which was seen as a key factor that limits further gains in the AUD/USD pair. Furthermore, the decrease in China's Consumer Price Index (CPI) by 0.2%, compared to the expected decline of 0.1%, also had a strong negative impact on the AUD/USD pair.
RBA's Interest Rate Decision and Australian Economic Indicators
It's worth noting that the Reserve Bank of Australia recently raised its Official Cash Rate from 4.10% to 4.35%, the highest in 12 years, due to a higher-than-expected inflation rate of 5.6% in the September Consumer Price Index. Meanwhile, Australia's TD Securities Inflation dipped to 5.1% in September. On a positive note, Retail Sales grew by 0.2% in the third quarter, bouncing back from a 0.6% decline in the previous quarter.
Meanwhile, economists at the National Australia Bank (NAB) are anticipating another 0.25% interest rate increase in February, with no rate cuts expected until November 2024, based on fourth-quarter inflation data. Hence, the increase in the Official Cash Rate and strong inflation data will likely strengthen the Australian Dollar and contributes to the AUD/USD pair gains.
China's Inflation Decline and Its Potential Impact on AUD/USD Pair
Furthermore, the most recent inflation figures from China disclosed a yearly decline in October that exceeded expectations. It should be noted that the Consumer Price Index (CPI) indicated a 0.2% annual drop, surpassing the anticipated 0.1% decrease. Moreover, the monthly CPI contracted by 0.1%, in contrast to the previous 0.2% growth.
Pan Gongsheng, the Governor of the People's Bank of China (PBOC), has conveyed his confidence in the economy by stating that it is following a positive trajectory. He also mentioned the country's potential to achieve the 5% growth target. Despite the decrease in inflation, his remarks reflect optimism regarding the economic direction of China.
Therefore, the decrease in China's inflation will result in a weakening of the Australian dollar (AUD) against the US dollar (USD). This is due to the potential decrease in demand for Australian exports to China, which could have a negative impact on the AUD/USD pair.
AUD/USD - Technical Analysis
The Australian dollar has manifested a modest uptick against its US counterpart in the latest session, advancing by 0.18% to trade at 0.64136. The four-hour chart delineates a landscape of fluctuation where the AUD/USD has been testing the waters around a pivot point of 0.6453, indicating a tentative search for direction.
Key resistance levels await at 0.6583, 0.6652, and 0.6790, which may pose formidable barriers to any northbound aspirations. Meanwhile, the currency pair finds its immediate cushion at 0.6379, with further downside protection potentially emerging at 0.6243 and 0.6177. These levels delineate the zones of contention between the bulls and the bears, setting the stage for the pair's next significant move.
From the vantage point of technical indicators, the Relative Strength Index (RSI) reads at 43, signaling that while the sentiment isn’t overly bearish, it lacks the robust bullish momentum typically associated with readings above 50. The Moving Average Convergence Divergence (MACD) hovers around the baseline, suggesting a market in balance without clear direction.
The price's proximity to the 50-day Exponential Moving Average (EMA), currently at 0.642, indicates a delicate equilibrium. The AUD/USD sits just below this moving average, hinting at a potential shift in momentum should it decisively cross above this level.
Chart pattern analysis requires a scrupulous examination of the recent price formation, which may reveal structures like channels or triangles, providing additional clues. Such patterns, coupled with candlestick analysis, will help ascertain the market's mood and the likely trajectory of the currency pair.
In summary, while the trend for the AUD/USD pair could be deemed neutral, a bullish bias is justifiable above the 0.640 44 mark, pending a confirmed breakout. The short-term forecast suggests that a test of the immediate resistance level at 0.6583 could be on the horizon, should the pair garner enough upward momentum to eclipse the immediate technical thresholds.
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