AUD/USD Price Analysis – Oct 10, 2024

Daily Price Outlook

During the European trading session, the AUD/USD currency pair found itself in positive territory on Thursday, breaking a five-day losing streak and trading around 0.6730 level. This upward movement can be linked to a risk-on market sentiment, which generally supports the Australian dollar (AUD) and helped boost the pair’s value.

However, the stronger US dollar (USD) is casting a shadow, fueled by growing speculation that the Federal Reserve may implement a 25 basis point rate cut in November, putting pressure on the Aussie in the near term.

Moreover, recent efforts by Beijing to stimulate its economy fell short of expectations, disappointing investors.

China's top economic planning authority did not announce any new measures to boost growth, which raises concerns, especially since China is one of Australia’s major trading partners.

These worries about China's slowing economy could weigh on the value of the Australian dollar, highlighting the interconnectedness of global economies.

Fed Rate Cut and Its Impact on AUD/USD Pair

On the US front, the stronger US dollar is facing potential challenges as speculation grows around a possible 25 basis point rate cut by the Federal Reserve in November. Investors are keeping a close eye on the upcoming Consumer Price Index (CPI) inflation data, which will be released later on Thursday.

Notably, the headline CPI is expected to show a 2.3% year-over-year increase for September, while core CPI inflation is projected to rise by 3.2% in the same period.

If the report reveals softer inflation than expected, it could increase the likelihood of a significant Fed rate cut, which might weaken the dollar and support the Australian dollar (AUD).

In the meantime, the recent comments from Federal Reserve officials also suggest the possibility of rate cuts.

San Francisco Fed President Mary Daly mentioned that one or two more cuts could happen this year if economic conditions align with her expectations, expressing confidence that inflation is moving toward the Fed's 2% target.

Similarly, Boston Fed President Susan Collins indicated that weaker inflation trends make further rate reductions likely. Markets are currently pricing in nearly an 80% chance of a 25 basis point cut in November, a significant rise from 31.1% just last week, according to the CME FedWatch Tool.

Therefore, the potential for a Fed rate cut and softer inflation data could weaken the US dollar, providing support for the AUD/USD pair. This environment may help the Australian dollar recover some of its losses, counteracting the stronger dollar's influence.

Impact of China's Economic Challenges on the AUD/USD Pair

On the other side, Beijing's efforts to boost the economy have left investors disappointed, as the country's top economic planning authority did not introduce new measures to address slowing growth.

This is significant because China is a major trading partner for Australia, and concerns about its economic performance typically weaken the Australian dollar (AUD).

Meanwhile, the Reserve Bank of Australia's (RBA) September meeting minutes indicated that board members noted there would be no rate cuts in the near future but want to remain flexible to see if the economy improves later this year.

This approach keeps the possibility open for a neutral stance by the end of the year, with potential rate cuts in early 2025. ANZ analysts predict that the first cash rate cut may occur in February 2025.

Furthermore, the World Bank has forecasted a slowdown in China’s growth rate to 4.3% in 2025, down from a projected 4.8% this year.

Therefore, the disappointment in China's economic efforts and forecasts of slower growth are likely to weaken the Australian dollar (AUD), which may lead to a bearish outlook for the AUD/USD pair as investors react to these economic signals.

AUD/USD - Technical Analysis

The Australian Dollar (AUD/USD) is trading at $0.67392, up 0.33%, signaling a potential rebound from recent lows. On the 4-hour chart, the pair is testing the pivot point at $0.67389, which aligns with a minor support level.

If the AUD/USD sustains its position above this level, it could target the immediate resistance at $0.67621, followed by the 50-day Exponential Moving Average (EMA) at $0.67612.

A successful breakout above the 50-day EMA would pave the way for further gains toward the next resistance levels at $0.67861 and $0.68105.

Conversely, if the AUD/USD fails to hold above $0.67389, the pair may encounter initial support at $0.67108, followed by deeper support levels at $0.66915 and $0.66708.

A breach below $0.66708 would likely signal increased bearish pressure, exposing the pair to further downside risks.

The Relative Strength Index (RSI) stands at 50, indicating neutral market sentiment. This suggests that AUD/USD could move in either direction depending on whether it breaks above or below the current pivot level.

With the RSI at equilibrium, traders should watch for a clear breakout above $0.67621 or a breakdown below $0.67108 for directional cues.

Given the current technical setup, buying interest above $0.67223 could drive the pair toward $0.67616, while a failure to maintain above this level may trigger selling pressure.

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