Technical Analysis

AUD/USD Price Analysis – Dec 05, 2023

By LonghornFX Technical Analysis
Dec 5, 20233 min

Daily Price Outlook

The AUD/USD currency pair failed to stop its downward trend and slipped below the level of 0.6600 during European trading session on Tuesday. However, this decline followed the monetary policy meeting of the Reserve Bank of Australia (RBA). As widely anticipated, the RBA decided to keep the interest rate unchanged at 4.35%. Consequently, the decision had a negative effect on the Australian Dollar and contributed to the losses in AUD/USD pair.

On the other side, the market has factored in a 97% probability that the Federal Reserve will maintain the interest rate within the range of 5.25% to 5.50% in the upcoming meeting. This exerted downward pressure on the US dollar and serve as a supportive factor for the AUD/USD pair.

RBA's Cautious Stance and Potential Impact on AUD/USD Pair

As we mentioned above, the Reserve Bank of Australia (RBA) decided to keep the interest rate unchanged at 4.35% during its December meeting. RBA Governor Michele Bullock mentioned that the need for additional tightening would depend on data and risk assessments for inflation targeting. Bullock also highlighted that maintaining the current cash rate allows the RBA to consider the effects of recent rate increases on demand, inflation, and the job market.

Therefore, the AUD/USD pair experienced a losses as the RBA's decision to keep the interest rate at 4.35% suggests a cautious stance, potentially leading to a weakening Australian Dollar.

Anticipated Fed Rate Cut and its Impact on AUD/USD

Moreover, Federal Reserve Chair Jerome Powell has reinforced expectations that the central bank won't raise rates further in its December meeting and might even cut rates by March 2024. The CME FedWatch Tool indicates a 97% chances that the Fed will maintain rates between 5.25% and 5.50% in the next meeting, with over a 50% chance of a 25 basis points rate cut by March next year, up from around 21% a week ago.

Hence, this potential rate cut could put downward pressure on the US Dollar, providing support for the AUD/USD pair.

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

AUD /USD - Technical Analysis

The Australian Dollar (AUD/USD) experienced a retreat in today's market, edging down by 0.63% to a trading value of 0.65. This recent move underscores a tepid sentiment as the currency grapples with fluctuating market forces.

Technical levels delineate a battleground for the AUD, with a pivot point at $0.6500 serving as the day's barometer for trend direction. Should bullish momentum take hold, traders will look to an immediate ceiling at $0.6600, followed by successive resistance levels potentially up to $0.6700. However, a slip in confidence could see the Aussie test floors at $0.6400, a support zone that holds the key to staving off further declines.

The Relative Strength Index (RSI) stands at 37, teetering towards the oversold territory but without decisively crossing the threshold, hinting at a bearish undercurrent yet a possibility of trend reversal if external market stimuli provide a nudge.

The 50-Day Exponential Moving Average (EMA), currently at $0.6600, poses a dynamic confluence point, with the AUD trading beneath it, a traditional bearish signal. Yet, the EMA's proximity to current levels could see it easily reclaimed in a bullish shift.

Chart patterns do not currently present a clear trajectory, awaiting clearer signals for directional bias.

In sum, the AUD/USD pairing reveals a bearish trend as long as it remains below the $0.6600 mark. The upcoming sessions are pivotal to determine if the Aussie can muster the strength to breach this threshold or if it will capitulate to lower support levels.

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