AUD/USD Price Analysis – Sep 03, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair extended its bearish trajectory, slipping to an intra-day low of 0.6730 and hovering around the 0.6732 level. This downward movement is primarily driven by a strengthening US dollar, bolstered by upbeat US economic data and rising Treasury yields. However, the dollar's gains may be tempered by growing market expectations of a 25 basis point rate cut by the Federal Reserve in September.
Besides this, the Australian dollar faces pressure from domestic economic indicators. The unexpected decline in Australia’s Private Capital Expenditure and lower-than-anticipated CPI figures are weighing on the AUD, contributing to its weakness against the USD.
Traders are now eyeing Australia's Q2 Gross Domestic Product (GDP) and July Trade Balance data, along with a forthcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, for further insights into the central bank's monetary policy outlook.
US Dollar Strengthens Amid Mixed Economic Data and Rate Cut Speculation, Pressuring AUD/USD
On the US front, the broad-based US dollar strengthened as Treasury yields continued to rise. However, its gains could be limited by growing expectations that the Federal Reserve might cut interest rates by 25 basis points in September.
Traders are now looking ahead to the upcoming US employment data, especially the August Nonfarm Payrolls (NFP), for more clues on the timing and extent of potential Fed rate cuts.
Recent US economic data highlights mixed signals. The US Bureau of Economic Analysis reported that the headline Personal Consumption Expenditures (PCE) Price Index rose by 2.5% year-over-year in July, slightly below the expected 2.6%.
The core PCE, excluding food and energy, also grew by 2.6%, just shy of the 2.7% forecast. Meanwhile, US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, surpassing expectations.
Initial Jobless Claims fell to 231,000 for the week ending August 23, indicating a slight improvement in the labor market. However, Federal Reserve Atlanta President Raphael Bostic suggested that it might be time to consider rate cuts due to cooling inflation and rising unemployment, with his comments being rated as neutral on the hawkish-dovish scale.
Consequently, the mixed US economic data and rising Treasury yields, along with speculation about a Fed rate cut, have contributed to the US dollar's strength, putting downward pressure on the AUD/USD pair as the Australian dollar struggles to maintain its value.
Mixed Australian Economic Data Creates Uncertainty for AUD/USD Pair
On the other hand, Australia’s Building Permits surged by 10.4% month-over-month in July, recovering strongly from a 6.5% decline in June and marking the highest growth since May 2023. On an annual basis, building permits grew by 14.3%, a notable rebound from the previous 3.7% decline, indicating a positive trend in the construction sector.
However, Australia's economic outlook is mixed. Private Capital Expenditure unexpectedly dropped by 2.2% in the second quarter, reversing from a 1.9% expansion in the previous period and missing market expectations for a 1.0% increase.
This decline marks the first contraction in new capital spending since the third quarter of 2023. Additionally, Australia’s Monthly Consumer Price Index (CPI) rose by 3.5% year-on-year in July, down slightly from June's 3.8% but slightly above the expected 3.4%. Despite the decrease, this is the lowest CPI figure since March, reflecting some easing in inflation.
Traders are now watching closely for Australia's Q2 Gross Domestic Product (GDP) and July Trade Balance data, along with an upcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, for further clues on the central bank's approach to monetary policy.
Therefore, the mixed economic data from Australia, including a rebound in building permits and declines in capital expenditure and CPI, may create uncertainty for the AUD/USD pair. Traders will be closely watching upcoming GDP and Trade Balance reports for clearer direction.
AUD/USD - Technical Analysis
The Australian Dollar (AUD/USD) is currently trading around $0.6742, showing signs of a bearish continuation following a recent breakdown. The pair is under pressure as it trades below the key support level of $0.6754, now acting as immediate resistance. The breakdown below this level has opened the door for further declines towards the next support levels.
The pivot point for today’s session is at $0.6754, which also marks the immediate resistance. Should the pair attempt a recovery, it may find resistance at $0.6770, with the next levels of resistance at $0.6784 and $0.6793. On the downside, immediate support lies at $0.6720, followed by $0.6699 and $0.6677.
Technical indicators are pointing towards continued bearish momentum. The Relative Strength Index (RSI) is currently at 33.73, indicating oversold conditions, which could suggest a potential short-term rebound before the downtrend resumes. The 50-day Exponential Moving Average (EMA) is positioned at $0.6784, reinforcing the resistance around this level.
Given the recent price action and the technical indicators, a sell position below $0.6754 could be considered, with a take profit target at $0.6720 and a stop loss set at $0.6770 to manage risk. The breakdown below key support levels suggests that the bears are in control, and the pair could see further declines if it remains below the $0.6754 pivot point.
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- AUD/USD Price Analysis – Sep 03, 2024
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