AUD/USD Price Analysis – Sep 12, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair managed to halt its downward trend and regain some of its gains around the 0.6676 level, reaching an intra-day high of 0.6695.
These gains occurred despite the US dollar gaining momentum amid decreasing odds for a significant Fed rate cut.
The upward trend in the AUD/USD can be attributed to the risk-on market sentiment, which generally supports the Australian dollar and contributes to its gains.
On the other hand, news that China might cut interest rates on $5 trillion in mortgages to boost consumption has raised concerns about a slowdown in its economy.
This, combined with a slight strengthening of the US Dollar (USD), has led to a sharp decline in the Australian Dollar (AUD).
China's Potential Rate Cuts and USD Strength Impacting AUD
On the AUD front, reports suggest that China might cut interest rates on $5 trillion in mortgages this month to boost consumer spending. This has raised concerns about a slowdown in China's economy, which is the world's second-largest.
These worries have negatively impacted currencies from countries closely linked to China, such as the Australian Dollar (AUD).
Meanwhile, a slight strengthening of the US Dollar (USD) has contributed to the sharp drop in the AUD. The combination of fears about China's economic slowdown and the stronger USD has led to a significant decline in the AUD during the trading session.
Impact of US CPI Report and Fed Rate Cut Expectations on AUD/USD
On the US front, the latest Consumer Price Index (CPI) report showed that overall consumer prices are easing. However, the core CPI data, which excludes volatile items like food and energy, indicates that underlying inflation remains stubbornly high.
This has reduced expectations for a significant rate cut by the Federal Reserve (Fed) at their next meeting. As a result, US Treasury bond yields have risen, pushing the US Dollar closer to its monthly peak.
Despite this, investors believe that the Fed will start easing its policy and cut interest rates by 25 basis points at each of the remaining three meetings in 2024.
This belief, coupled with a positive market mood, has limited further gains for the US Dollar and provided some support for the Australian Dollar (AUD).
Traders are now waiting for the US Producer Price Index (PPI) report to provide new direction for the market.
Therefore, the easing US CPI and persistent core inflation have bolstered US Treasury yields and strengthened the US Dollar, pushing the AUD/USD pair lower. However, expectations of future Fed rate cuts and positive market sentiment have provided some support to the AUD.
AUD/USD - Technical Analysis
AUD/USD is trading at $0.66907, up by 0.25%, reflecting a moderate recovery as the pair attempts to gain traction within a largely subdued environment.
The currency pair is hovering above its 50-day Exponential Moving Average (EMA) at $0.6672, a crucial technical level that has served as dynamic support. This indicates that the bullish momentum could build further if the pair manages to break through immediate resistance levels.
Immediate resistance stands at $0.6720, aligning with the pivot point, which could be a key level for bullish traders.
A break above this resistance could lead AUD/USD toward $0.6751, followed by the next target at $0.6793, suggesting a broader upside potential. However, a failure to breach $0.6720 may limit gains and reinforce selling pressure.
On the downside, immediate support is located at $0.6635, and a move below this could push the pair toward $0.6610 and further down to $0.6580.
The RSI at 60 suggests a mild bullish bias, but it's not yet in overbought territory, signaling there’s room for upward movement.
Traders should be mindful of these key levels. A sustained move above the $0.6720 pivot point is critical for extending the bullish trajectory, while a fall below $0.6635 could signal a deeper correction.
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