AUD/USD Price Analysis – Oct 31, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair stopped its sluggish trend, gaining positive traction around the 0.6580 level. This bullish movement came as the US dollar turned bearish, with the US Dollar Index (DXY), which tracks the dollar's value against six major currencies, slipping slightly below 104.00.
Traders are now focused on the upcoming United States Nonfarm Payrolls (NFP) data for October, as it’s expected to shape market expectations for the Federal Reserve's interest rate decisions in the months ahead.
On the AUD side, the slower-than-expected inflation growth in Australia has dampened market expectations for a rate hike by the Reserve Bank of Australia (RBA), negatively impacting the Australian dollar (AUD) as investors seek higher-yielding currencies
Cautious US Market Sentiment and Its Impact on AUD/USD Pair
On the US side, market sentiment is cautious as investors adopt a risk-averse approach ahead of the presidential elections on November 5.
Recent national polls show a tight race between former President Donald Trump and current Vice President Kamala Harris, with many traders seemingly betting on a Trump victory.
If elected, Trump is expected to implement protectionist policies that could significantly impact the US's major trading partners.
Moreover, the US Dollar Index (DXY), which measures the dollar's strength against six major currencies, has dipped slightly below 104.00.
The upcoming Nonfarm Payrolls (NFP) report is projected to show an addition of only 115,000 jobs in October, a decrease from 254,000 in September, while the unemployment rate is expected to remain steady at 4.1%.
Investors are also keeping an eye on the US ISM Manufacturing PMI for October, which is anticipated to show a contraction but at a slower pace, moving from 47.2 in September to 47.6. These data points will likely influence market expectations for the Federal Reserve's interest rate decisions in the coming months.
Therefore, the cautious market sentiment and anticipated protectionist policies from a potential Trump presidency may weaken risk appetite, which could support the AUD/USD pair as a bearish US dollar makes Australian assets more appealing.
Meanwhile, disappointing US employment data may lead to a weaker dollar, further bolstering the AUD/USD exchange rate.
Impact of Slower Inflation on AUD/USD Pair
On the other side, inflation growth in Australia has been slower than anticipated in the third quarter, affecting market expectations for the Reserve Bank of Australia (RBA). As a result, traders now believe the RBA will maintain its Official Cash Rate (OCR) at current levels for a longer period.
Notably, the year-on-year Consumer Price Index (CPI) dropped significantly from 3.8% in the previous quarter to 2.8%, which was faster than analysts expected. In the meantime, the Annual Trimmed Mean CPI, which the RBA prefers to use as its inflation measure, increased by 3.5%, aligning with expectations.
Therefore, the slower-than-expected inflation growth in Australia may weaken the Australian dollar against the US dollar, as market expectations shift toward a prolonged period of stable interest rates from the RBA. This could create downward pressure on the AUD/USD pair.
AUD/USD – Technical Analysis
The AUD/USD pair is currently trading at $0.65676, down 0.06% on the day, as it remains under pressure below the pivot point at $0.66094.
The pair is struggling to gain traction amidst broader market sentiment favoring the U.S. dollar. With an RSI of 42, AUD/USD appears to be in a modestly bearish phase, indicating potential for further downside if selling momentum persists.
Immediate resistance for the pair stands at $0.65849, followed by more significant resistance levels at $0.66449 and $0.66873. A breakout above these levels would need strong buying interest, which is unlikely without supportive economic data or a shift in market sentiment.
On the downside, immediate support is located at $0.65420, with subsequent levels at $0.65092 and $0.64730. Notably, the 50-day Exponential Moving Average (EMA) is positioned at $0.66234, acting as a key barrier above the current price.
This EMA level reinforces the bearish outlook, as a sustained move below it could signal continued downside momentum.
For traders, a break below the entry price of $0.65857 could present a selling opportunity, targeting $0.65413 with a stop loss at $0.66106.
The current technical landscape suggests AUD/USD may continue its slide unless it manages to reclaim the $0.66094 pivot level, where a bullish reversal would become more likely. Traders should watch for any decisive moves below $0.65857, as it could validate further downside.
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