Technical Analysis

AUD/USD Price Analysis – April 30, 2024

By LonghornFX Technical Analysis
Apr 30, 20244 min

Daily Price Outlook

Despite the risk-on market sentiment, the AUD/USD currency pair failed to gain any positive traction and remained under pressure around 0.6532, hitting the intraday low of 0.6514 level. However, the downticks in the AUD/USD pair were driven by the release of softer Retail Sales data on Tuesday. The pair lost traction right after the release of lower-than-expected domestic Retail Sales data as weak retail sales suggest subdued consumer spending and slower economic growth, leading the Reserve Bank of Australia to maintain or even lower interest rates to stimulate economic activity, a dovish stance.

Moreover, the broad-based US dollar gained bullish traction on the back of expectations that the Federal Reserve will maintain higher interest rates due to persistent inflation. This bullish US dollar was seen as another key factor that kept the AUD/USD currency pair lower.

Australian Retail Sales Data and Chinese Economic Indicators: Impact on AUD/USD Pair

On the data front, Australian Retail Sales dropped by 0.4% in March, missing expectations for a 0.2% increase and reversing the previous month's 0.3% growth. This disappointed investors, leading to a decline in the Australian Dollar. However, the Australian Dollar might recover as recent inflation data exceeded expectations, hinting that the RBA could postpone rate cuts. Commonwealth Bank also revised its forecast, now expecting the first rate cut in November instead of earlier, which could support the Aussie.

Thus, the decline in Australian Retail Sales pressured the AUD/USD pair initially, but positive inflation data and revised rate cut forecasts from Commonwealth Bank may support the Aussie in the near term.

On the China front, the NBS Manufacturing Purchasing Managers Index (PMI) fell to 50.4, down from 50.8, though slightly better than expected. The Non-manufacturing PMI also dropped to 51.2, matching expectations. The IMF's recent report predicts a slowdown in China's economic growth, forecasting rates of 5.2% in 2023, 4.6% in 2024, and 4.1% in 2025.

Hence, the weaker Chinese economic data and IMF's growth forecast could weigh on the AUD/USD pair due to Australia's export reliance on China, potentially leading to reduced demand for the Australian Dollar.

Impact of Hawkish Fed Comments on AUD/USD Pair

On the US front, the broad-based US dollar has been gaining momentum due to hawkish comments from US Federal Reserve officials, suggesting no immediate rate cuts. The CME FedWatch Tool shows an 88.4% probability of the Fed maintaining interest rates in June, up from 83.5% last week. This stance of higher rates for a longer period is bolstering the US Dollar and posing a challenge for the AUD/USD pair.

Fed Chair Jerome Powell stated that it could take longer than expected to reach the 2% inflation target, indicating a prolonged high-rate environment. Fed officials like Michelle Bowman and Neel Kashkari have also hinted at potential upside inflation risks and the possibility of no rate cuts this year, respectively.

Therefore, the strengthening US dollar, fueled by hawkish Fed comments and increased probability of unchanged rates, poses challenges for the AUD/USD pair, with prolonged high-rate expectations and potential inflation risks influencing market sentiment.

AUD/USD Price Chart - Source: Tradingview
AUD/USD Price Chart - Source: Tradingview

AUD/USD - Technical Analysis

On April 30, the Australian Dollar (AUD/USD) closed at $0.65315, marking a decline of 0.49%. This downturn reflects a broader trend of caution in the forex markets, influenced by economic uncertainties and fluctuating risk appetites globally. Trading below the pivotal point of $0.65689, the AUD/USD is situated in a precarious position, suggesting potential further weakness. Resistance is set at higher thresholds of $0.66054, $0.66434, and $0.66878, which need to be surpassed to signal a shift towards a bullish outlook. Conversely, support levels are firmly established at $0.64849, $0.64425, and $0.64103, providing potential stopping points for further declines.

The currency pair’s technical indicators provide additional insight into its current dynamics. The 50-Day Exponential Moving Average (EMA), at $0.64853, lies just below the current trading price, indicating a near support zone that could stabilize further price drops. The Relative Strength Index (RSI) at 51 suggests a neutral momentum, pointing neither to overbought nor oversold conditions, which indicates that the currency could sway in either direction based on upcoming economic data and market sentiment.

Entry Price: Sell below $0.65598 if the AUD/USD continues to show weakness. Take Profit: Target a take profit at $0.65034 to capture potential downward movement. Stop Loss: Set a stop loss at $0.66054 to limit risks against unexpected bullish reversals.

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