AUD/USD Price Analysis – Oct 08, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair has continued its bearish trend, trading around the 0.6734 level and hitting an intra-day low of 0.6715. This downward movement can be attributed to risk-off market sentiment, which tends to undermine riskier assets like the Australian dollar (AUD), contributing to the pair's losses. Moreover, comments from the National Development and Reform Commission during a recent press conference have further pressured the AUD/USD.
However, the losses could be short-lived due to the hawkish stance of the Reserve Bank of Australia (RBA) following its September Meeting Minutes. Meanwhile, the US dollar has slightly weakened despite strong jobs report for September has tempered expectations for aggressive rate cuts by the Federal Reserve. Hence, the bearish US dollar provides some support to the AUD/USD pair to limit its losses.
Looking ahead, investors are eager for insights from Fed officials later on Tuesday, as well as the Federal Open Market Committee (FOMC) Minutes. All eyes will then turn to the US Consumer Price Index (CPI) for September, set to be released on Thursday, which could significantly influence market direction.
Australian Dollar Under Pressure Amid Economic Concerns and RBA Caution
As we mentioned above, the Australian dollar is losing traction due to comments from the National Development and Reform Commission during a press conference. China's state planner indicated that the country's economy is facing a more complex internal and external environment, disappointing traders who were hoping for significant stimulus measures. Meanwhile, escalating geopolitical tensions in the Middle East have created a risk-off sentiment in the market, putting further selling pressure on riskier assets like the AUD.
Furthermore, the Reserve Bank of Australia (RBA) released its September Meeting Minutes on Tuesday, revealing that board members discussed future scenarios for both lowering and raising interest rates. The Minutes stated, “Policy will need to remain restrictive until Board members are confident inflation is moving sustainably towards the target range.”
RBA Deputy Governor Andrew Hauser emphasized that the central bank will take action only when inflation is no longer high and persistent. He noted that reducing inflation is a significant task and that they are not finished yet. This cautious approach suggests that the RBA is focused on maintaining stability amid current economic challenges.
Therefore, the news is likely to weaken the AUD/USD pair as risk-off sentiment and disappointing Chinese economic signals undermine the Australian dollar. The RBA's cautious stance on interest rates further contributes to bearish pressure on the AUD against the US dollar.
US Dollar Weakens Amid Strong Jobs Report and Cautious Fed Outlook
On the US front, the broad-based US dollar lost some of its gains on Tuesday. However, a strong jobs report for September has led to reduced expectations for aggressive rate cuts by the Federal Reserve. This report highlights a robust labor market, prompting investors to lower their bets on significant interest rate cuts. As a result, demand for gold, which is a non-yielding asset, has also been negatively affected. According to the CME's FedWatch tool, there is now an 85% chance of a 25 basis point rate cut at the Fed's next meeting in November.
Meanwhile, Federal Reserve officials are shifting their focus from concerns about high inflation to the potential risks of rising unemployment. Minneapolis Fed President Neel Kashkari pointed out this shift, while St. Louis Fed President Alberto Musalem noted that further interest rate cuts would depend on economic performance.
Traders are remaining cautious as they await important US inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), as well as the minutes from the Federal Open Market Committee (FOMC) meeting, both of which are due this week. These reports could significantly influence gold prices and market sentiment.
AUD/USD - Technical Analysis
The AUD/USD pair is currently trading at 0.67354, down 0.51% for the day, following a consistent bearish trend. This decline has pushed the pair below its key pivot point at 0.67678, indicating potential for further downside movement in the near term.
The 4-hour chart suggests that the pair is struggling to regain upward momentum as it hovers around immediate support at 0.67149. Should the price break below this support, the next targets would be at 0.66845 and 0.66569.
The Relative Strength Index (RSI) is hovering at 28, indicating that the pair is in oversold territory and may be due for a short-term corrective bounce. However, the bearish pressure remains strong as AUD/USD trades below its 50-day Exponential Moving Average (EMA) at 0.68150, suggesting that any upward moves could be limited by this resistance level.
On the upside, a move above the immediate resistance at 0.68078 could signal a potential reversal, with subsequent targets at 0.68417 and 0.68884. However, the overall technical sentiment favors further bearishness, particularly if prices continue to stay below the 0.67678 pivot point.
Given the current technical setup, traders should consider selling below 0.67671 with a take profit target at 0.67144 and a stop loss at 0.68050. However, any break above 0.68078 could shift sentiment toward a potential short-term recovery.
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