AUD/USD Price Analysis – Oct 15, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair continued its downward trend, hovering around 0.6710 despite a generally risk-on market sentiment. This bearish movement was primarily influenced by disappointing trade balance data from China, which is Australia's largest trading partner, released on Monday.
Moreover, China announced a fiscal stimulus plan, but it did little to bolster the Australian dollar, as investors were left unsure about the package's size and impact. Compounding these challenges, the US dollar remained strong, fueled by expectations that the Federal Reserve will take a less aggressive approach to easing its monetary policy. As a result, traders are now looking ahead to the release of the Empire State Manufacturing Index and further comments from Fed officials.
Expectations of RBA Rate Cuts and Low Consumer Confidence Weigh on AUD/USD Pair
On the AUD front, the currency is facing downward pressure due to a report from the Commonwealth Bank of Australia. The report indicates that the Reserve Bank of Australia (RBA) is expected to cut interest rates by 25 basis points by the end of 2024. It also highlights that for the RBA to consider easing its policy this year, a stronger disinflationary trend than currently anticipated is needed. This expectation has contributed to the bearish sentiment surrounding the Australian dollar.
In addition, the latest weekly survey on Consumer Confidence showed little change, with the ANZ-Roy Morgan Consumer Confidence index remaining steady at 83.4. While this figure hasn't changed, it’s important to note that Consumer Confidence has stayed below the 85.0 mark for an unprecedented 89 weeks. However, the current reading is slightly above the 2024 weekly average of 82.1.
Last week, the RBA also released minutes from its September meeting, revealing that board members discussed possible scenarios for both increasing and decreasing interest rates in the future. They noted that future financial conditions might need to be either tighter or looser than they are now to achieve the RBA's objectives.
Therefore, the expectations of an RBA rate cut and persistently low Consumer Confidence are likely to weaken the AUD/USD pair, as traders may anticipate a bearish outlook for the Australian dollar amid ongoing uncertainty regarding Australia's economic conditions.
Impact of China's Fiscal Stimulus and Economic Data on AUD/USD Pair
On the other hand, China’s recent fiscal stimulus plan announced over the weekend did not strengthen the Australian dollar, as investors remained uncertain about the details and scale of the initiative. Adding to the tension, China conducted military drills in the Taiwan Strait on Monday. The US Department of State expressed serious concerns over these military actions, while Taiwan’s Defense Ministry assured that it would not escalate the situation further.
Moreover, China's National Bureau of Statistics reported that the Consumer Price Index (CPI) remained flat at 0% in September, down from a 0.4% increase in August. The annual inflation rate rose by only 0.4%, which was below the expected 0.6%. Meanwhile, the Producer Price Index (PPI) saw a more significant decline, dropping by 2.8% year-on-year, compared to a previous drop of 1.8% and exceeding expectations of a 2.5% decrease.
On a more positive note, the National People’s Congress expressed optimism after a briefing from China’s Ministry of Finance. The ministry highlighted its commitment to stabilizing the property market and addressing local government debt by issuing special bonds to support bank recapitalization and the real estate sector.
Therefore, the lack of clarity surrounding China’s fiscal stimulus, coupled with military tensions and weak inflation data, is likely to further pressure the Australian dollar. This uncertainty may lead to a continued decline in the AUD/USD pair as investor confidence wanes.
AUD/USD - Technical Analysis
AUD/USD is currently trading at $0.67130, down 0.19%, as the pair experiences selling pressure following its failure to break key resistance levels. The pivot point stands at $0.67304, with immediate resistance at $0.67576. A move above this could push the pair towards the next resistance levels at $0.67810 and $0.68105. However, current market sentiment appears bearish, suggesting that any rally may struggle to gain traction.
On the downside, immediate support is seen at $0.67025, with deeper support at $0.66828 and $0.66615. If AUD/USD breaks below these levels, it could signal further downside movement. The 50-day EMA at $0.67292 is trending just above current prices, indicating potential resistance on the path to recovery.
The RSI currently sits at 41, suggesting that the pair is in bearish territory. Momentum is skewed to the downside, indicating increased selling pressure. A break below the pivot point at $0.67304 may confirm further declines, with bears likely to target support at $0.66828.
Given the bearish technical signals, traders may consider short positions below $0.67304, with a take-profit target of $0.66908 and a stop-loss at $0.67522.
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