AUD/USD Price Analysis – Nov 12, 2024

Daily Price Outlook

During the European trading session, the AUD/USD pair struggled to hold its ground, staying weak around the 0.6544 level and hitting an intraday low of 0.6534. However, the downward trend can be attributed to several factors including the anticipated tariff hikes on Chinese goods by US President-Elect Donald Trump pose risks to the AUD, as China is one of Australia's biggest export markets.

Meanwhile, the Westpac Consumer Confidence index in Australia rose by 5.3% to 94.6 in November, marking a two-and-a-half-year high but remaining below 100, indicating continued economic caution among consumers.

Moreover, the US Dollar gained strength as markets expect that Trump’s proposed fiscal policies may drive up investment and labor demand, potentially increasing inflation risks. This could lead the Federal Reserve to tighten its monetary policy, further supporting the US Dollar and applying additional pressure on the AUD/USD pair.

Consumer Confidence in Australia Boosted but Chinese Inflation and Limited Stimulus Weigh on AUD Outlook

On the AUD front, Australia's Westpac Consumer Confidence index rose by 5.3% to 94.6 in November, marking the highest level in two and a half years. This is the second month in a row of improvement, although the index remains below 100, meaning pessimism still outweighs optimism.

Matthew Hassan, a senior economist at Westpac, explained that families are feeling less financial pressure and are less worried about interest rate hikes, with growing confidence in the economy’s future.

Furthermore, the Australian Dollar also faced pressure from disappointing Chinese inflation data. China's Consumer Price Index (CPI) rose just 0.3% year-over-year in October, slightly below forecasts and down from September’s 0.4%, marking the lowest rate since June.

Month-over-month, the CPI fell by 0.3%, a bigger drop than expected, highlighting weaker demand. In the meantime, Bloomberg reported that Chinese regulators may soon lower taxes on home purchases, aiming to boost the real estate market.

Although, the losses in the AUD may be limited by the Reserve Bank of Australia’s hawkish tone. RBA Governor Michele Bullock recently stressed the need for tight monetary policy due to high inflation and a strong job market.

China’s latest stimulus package, a 10 trillion Yuan debt relief for local governments, was smaller than expected and lacked direct economic stimulus, further dampening optimism in Australia’s key trading partner.

Therefore, the rise in Australia's consumer confidence and the RBA's hawkish stance may provide some support for the AUD. However, weaker Chinese inflation data and limited stimulus from China could weigh on demand, likely putting downward pressure on the AUD/USD pair.

US Dollar Strengthens on Inflation Expectations and Fed's Restrictive Stance, Weighing on AUD/USD

On the US front, the US dollar is strengthening after Donald Trump’s election victory. Analysts believe that if his policies on spending, investment, and labor are put into action, they could increase inflation. This might lead the Federal Reserve (Fed) to raise interest rates, which would boost the US dollar even more.

Minneapolis Fed President Neel Kashkari said the economy is doing well but the Fed still needs to do more to bring inflation back to the 2% target. He added that the Fed needs more evidence before thinking about another rate cut.

Morgan Stanley analysts break down Trump’s potential economic plans into three areas: tariffs, immigration, and fiscal measures. They think tariffs will be a top priority, with a possible 10% tariff on all goods and a 60% tariff on Chinese goods.

While Trump’s return could lead to policy changes, Fed Chair Jerome Powell said the Fed doesn't make decisions based on possible policies. Powell emphasized that the Fed will focus on current data after cutting interest rates by 0.25%, bringing them to a range of 4.50%-4.75%.

Traders are now watching for the upcoming US Consumer Price Index (CPI) data. October’s headline CPI is expected to rise by 2.6% year-over-year, with core CPI projected at 3.3%, offering further insights into inflation trends.

Therefore, the strengthening US Dollar, driven by expectations of higher inflation and tighter Fed policies, puts pressure on the AUD/USD pair. If US inflation data aligns with forecasts, the Fed may continue its restrictive stance, further strengthening the US Dollar against the AUD.

AUD/USD – Technical Analysis

The AUD/USD pair is trading at $0.65554, down 0.28%, as it faces resistance near the pivot point of $0.65607. This level now serves as a critical marker for directional movement.

Immediate resistance sits just above at $0.65820, with additional barriers at $0.65981 and $0.66197. These levels could curtail short-term upside moves, especially as the pair remains under pressure from a strong US dollar and cautious sentiment around global growth.

On the downside, immediate support lies at $0.65369. Should the price break below this level, it may test the next support at $0.65166, with a further move toward $0.64962 if bearish momentum intensifies.

The Relative Strength Index (RSI) is currently at 30, indicating oversold conditions that could prompt a corrective bounce. However, a continued stay in the oversold region might also reflect persistent selling pressure, leaving the bearish outlook intact.

The 50-day Exponential Moving Average (EMA) is at $0.65879, slightly above the current price. This gap underscores the bearish trend, as the current price remains below both the pivot and key moving averages.

Given these signals, the short-term outlook for AUD/USD remains bearish, with potential for further declines if it stays below the $0.65607 pivot. Traders may consider entering a sell position below $0.65607, with a take-profit target of $0.65344 and a stop-loss at $0.65792 to manage risk.

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