AUD/USD Price Analysis – Sep 19, 2024

Daily Price Outlook

During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well-bid around the $0.6832 level, hitting an intra-day high of $0.6840. This upward movement can be attributed to the higher-than-expected increase in new jobs created in August.

Meanwhile, the bearish US dollar, driven by the Federal Reserve’s (Fed) 50 basis point (bps) interest rate cut, was another key factor that kept the AUD/USD pair higher.

Moving ahead, the People’s Bank of China’s (PBoC) Monetary Policy Committee (MPC) is scheduled to hold its quarterly meeting on Friday to review its loan prime rate (LPR).

RBA's Stance and Strong Employment Data Support AUD/USD, but Inflation Remains a Concern

On the AUD front, the Reserve Bank of Australia (RBA) Governor Michele Bullock stated that it is too early to consider rate cuts due to ongoing high inflation.

RBA Assistant Governor Sarah Hunter added that, although the labor market remains tight, wage growth seems to have peaked and may slow down.

In August, Australia’s unemployment rate stayed at 4.2%, as expected, while the number of unemployed people fell by 10,000, bringing the total to 627,000.

Employment increased by 47,500 jobs, which exceeded the forecast of 25,000, but was lower than July’s 58,200.

The Australian Bureau of Statistics (ABS) noted that full-time employment dipped by 3,100, while part-time employment rose by 50,600.

The participation rate held steady at a record 67.1%, and the employment-to-population ratio slightly improved to 64.3%, just shy of its November 2023 peak.

Although unemployment figures fell slightly in August, the number of unemployed people has grown by 45,000 since the end of 2023. Overall, Australia's labor market continues to show resilience despite some fluctuations.

This news could provide short-term support for AUD/USD, as stronger-than-expected employment data and stable unemployment may boost confidence in the Australian economy. However, ongoing high inflation and wage growth concerns may limit the currency's long-term gains.

Impact of the Federal Reserve Rate Cut and US Economic Data on the AUD/USD Pair

On the US front, the broad-based US dollar lost its strength after the Federal Reserve unexpectedly cut interest rates by 50 basis points, instead of the expected 25. The Fed lowered its benchmark rate to a range of 4.75%–5% and signaled another half-point cut by year-end.

According to updated forecasts, rates are expected to drop further to 3.4% in 2025 and 2.9% in 2026, down from earlier projections of 4.1% and 3.1%.

The Fed also indicated that inflation won't hit its 2% target before 2026, raising doubts about future rate cuts. Despite this, Fed Chair Jerome Powell reassured that there is no immediate recession risk, pointing to a strong labor market and cooling inflation.

In other economic data, US Retail Sales rose by 0.1% month-over-month in August, following a stronger 1.1% rise in July, which beat expectations of a 0.2% decline.

This suggests consumer spending remains resilient. The Retail Sales Control Group increased by 0.3%, slightly below the previous month’s 0.4%.

Meanwhile, the University of Michigan’s Consumer Sentiment Index rose to 69.0 in September, higher than expected, reflecting an improving outlook on the US economy after months of uncertainty.

Therefore, the unexpected rate cut by the Federal Reserve could actually support the AUD/USD pair, as a weaker US dollar generally boosts other currencies like the Australian dollar.

However, the positive US retail data and improved consumer sentiment might prevent significant gains for AUD/USD.

AUD/USD - Technical Analysis

The AUD/USD pair is trading at $0.6872, up 0.83%, signaling bullish momentum as it moves above key technical levels. Immediate resistance lies at $0.6845, with further resistance targets at $0.6868 and $0.6888.

On the downside, immediate support is found at $0.6784, followed by deeper supports at $0.6750 and $0.6725.

The 50-day Exponential Moving Average (EMA) at $0.6749 is providing solid support, indicating that the current upward trend remains intact.

The Relative Strength Index (RSI) sits at 66, suggesting the market is nearing overbought conditions, but still leaves room for further gains.

A break above $0.6868 would confirm the bullish trend, targeting the next resistance at $0.6888. However, if the pair falls below $0.6784, it could trigger a shift toward a more bearish outlook, testing the $0.6750 support level.

With China being a key trading partner for Australia, any news regarding China's economic performance or trade relations will likely influence the next move for AUD/USD.

Additionally, the U.S. dollar’s performance following the Federal Reserve’s recent interest rate decisions will play a critical role in the pair’s trajectory.

In summary, AUD/USD shows strong bullish signals but faces immediate resistance. Traders should watch for a breakout above $0.6868 to confirm further upward momentum.

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