Technical Analysis

AUD/USD Price Analysis – Jan 09, 2024

By LonghornFX Technical Analysis
Jan 9, 20244 min

Daily Price Outlook

Despite better-than-expected retail sales and building permits, the AUD/USD currency pair failed to stop its declining streak and dropped to around the 0.7399 level as the US Dollar started to recover its recent losses on the day. In contrast to this, the ongoing risk-on market sentiment, driven by comments from US Federal Reserve (Fed) members speculating about potential interest rate cuts by the end of 2024, was seen as one of the key factor that help the AUD/USD pair to limit its deeper losses. In the meantime, upbeat economic data from Australia was seen as another key factor that could strength of the Aussie Dollar (AUD).

Australian Economic Indicators: Implications for AUD/USD and Future Considerations

It is worth noting that Australia's Retail Sales for November surpassed expectations, rising by 2.0% instead of the expected 1.2%. Building Permits also exceeded forecasts at 1.6% compared to an expected decline of 2.0%. These positive economic indicators may strengthen the Australian Dollar against the USD in the short term.

Looking ahead, traders are eyeing the Monthly Consumer Price Index for insights into the Reserve Bank of Australia's interest rate plans, with expectations that rate cuts are unlikely in the upcoming February meeting. However, recent data, such as the below-expectation Judo Bank Services PMI and Manufacturing PMI, signals challenges in economic recovery.

Thus, the positive Retail Sales and Building Permits data could boost the Australian Dollar against the USD. Traders await Consumer Price Index insights for Reserve Bank actions, while lower-than-expected PMI figures suggest economic challenges.

Challenges for US Dollar (USD) and Potential Impact on AUDUSD Pair

Furthermore, the US Dollar Index (DXY) is facing challenges due to a drop in US Treasury yields. Softer comments from Fed members, signaling a more optimistic market, are putting pressure on the US Dollar (USD). Atlanta Fed President Raphael W. Bostic, discussing the 2024 economic outlook, noted a greater-than-expected decline in inflation.

He suggested the possibility of two quarter-point cuts by the end of 2024, expressing comfort with the current rate. Bostic emphasized giving the Fed's policies time to address inflation. Fed Governor Michelle W. Bowman, at a conference, mentioned a potential further drop in inflation if the policy rate remains steady, hinting at a potential future Fed rate cut.

Therefore, the US Dollar (USD) faces pressure against the Australian Dollar (AUD) as softer Fed comments and potential rate cuts dampen the USD. This, coupled with declining Treasury yields, may boost the AUD/USD pair.

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

AUD/USD - Technical Anaylsis

The Australian Dollar against the US Dollar (AUD/USD) presents a nuanced technical outlook as of Tuesday, January 9. Currently trading at 0.67166, the AUD/USD shows a marginal decline of 0.04%, reflecting a cautious market sentiment.

The pair’s pivot point lies at $0.6629, with immediate resistance levels identified at $0.6730, $0.6824, and $0.6930. These points indicate potential ceilings for any upward price movements. Conversely, support levels are established at $0.6535, $0.6429, and $0.6316, which could provide a safety net against further price drops.

The Relative Strength Index (RSI) for the AUD/USD stands at 46, indicating a bearish sentiment without reaching oversold conditions. The Moving Average Convergence Divergence (MACD) shows a value of 0.00054 with a signal line at -0.00129, hinting at a possible but not definitive upward momentum. The price of AUD/USD hovers near the 50-Day Exponential Moving Average (EMA) of $0.6713, suggesting a lack of a clear short-term trend.

Chart analysis reveals that AUD/USD has been trading sideways within a narrow range between 0.6740 and 0.6668. This pattern indicates a period of consolidation, with traders likely waiting for a significant catalyst to prompt a decisive move.

Given the current technical landscape, the overall trend for the AUD/USD pair appears neutral. The advised trading strategy under these conditions is to consider a sell position below 0.67430, with a take-profit target at 0.66679 and a stop-loss set at 0.68121. Traders should closely monitor these levels and be prepared to adapt their strategies as the market responds to upcoming economic data and global financial developments.

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