Technical Analysis

AUD/USD Price Analysis – Feb 06, 2024

By LonghornFX Technical Analysis
Feb 6, 20244 min

Daily Price Outlook 

The AUD/USD currency pair maintained its bullish bias and surged to the 0.6510 level. However, the reason for its upward trend can be attributed to the upbeat Australia's Retail Sales data, which tends to underpin the AUD currency and contribute to the AUD/USD pair gains. Furthermore, the Reserve Bank of Australia (RBA) maintained its Official Cash Rate (OCR) at 4.35% at February's meeting, as expected. The maintenance of the OCR at 4.35% by the RBA can be seen as positive news for the AUD because it indicates stability in monetary policy, which can attract investors and support the currency.

In contrast to this, upbeat US economy data and the hawkish comments from Federal Reserve (Fed) Chair Jerome Powell boosted the US dollar, which was seen as a key factor that capped further gains in the AUD/USD pair. Apart from this, the risk-off market sentiment, backed by the ongoing geopolitical tension in the Middle East and China's economy woes, was seen as another key factor that kept the lid on any additional gains in the AUD/USD pair.

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

It is worth noting that the latest Retail Sales data in Australia showed a slight uptick of 0.3% in the fourth quarter, indicating a modest improvement compared to the previous growth. However, Australia is currently facing a significant cost-of-living crisis, which poses challenges for the Reserve Bank of Australia (RBA) in terms of further interest rate hikes.Investors are eagerly waiting for RBA Governor Michele Bullock's speech to understand what the central bank might do next. Bullock said the bank is considering different ways to manage the economy and is watching inflation closely.

Consequently, this news could positively affect the AUD/USD pair as the RBA's cautious approach may stabilize the Australian economy, boosting investor confidence and potentially strengthening the Australian dollar against the US dollar.

Impact of Federal Reserve's Hawkish Stance on AUD/USD Pair

Furthermore, the broad-based US Dollar maintained its position near a three-month high after the Federal Reserve adopted a hawkish stance, supported by strong ISM Services data for January. Notably, the ISM Services PMI exceeded expectations, reaching 53.4, above both the consensus of 52.0 and the previous month's 50.5. Federal Reserve Chair Jerome Powell's remarks, emphasizing the importance of closely monitoring inflation's movement toward the 2% target, reduced expectations of rate cuts, further bolstering the dollar.

Therefore this news likely led to a decline in the AUD/USD pair due to the US Dollar's strength following the Federal Reserve's hawkish stance and positive ISM Services data, coupled with rising US Treasury yields.

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

AUD/USD - Technical Analysis

The Australian dollar edged up against its US counterpart, with the AUD/USD pair noting a modest rise of 0.16% to $0.64930 as of February 6. The currency pair has seen a slight lift in the 4-hour chart, reflecting a tempered but positive sentiment among traders.

The pivot point for the session is set at $0.6426, marking the immediate baseline for any shifts in market dynamics. Resistance levels are charted at $0.6471, followed by $0.6548 and $0.6588, which could serve as ceilings in the pair's upward trajectory. Supports are delineated at $0.6346, $0.6272, and $0.6195, potentially halting any bearish pullback.

The Relative Strength Index (RSI) at 37 indicates a market that is neither overbought nor oversold, leaving room for potential price swings in either direction. The Moving Average Convergence Divergence (MACD) presents a value of -0.00040 with its signal at -0.00243, implying that the negative momentum is abating, as the MACD line is closer to crossing above the signal line, potentially signaling an upcoming bullish phase.

The 50-day Exponential Moving Average (EMA) stands at $0.6502, just above the current price, suggesting a very tight trading range with the potential for the currency to oscillate around this key moving average.

In light of these observations, the overall technical outlook for the AUD/USD appears cautiously optimistic, with a strategy to buy above $0.64999, targeting profits at $0.65437, and placing a stop loss at $0.64674 to manage risk.

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