Technical Analysis

AUD/USD Price Analysis – Jan 23, 2024

By LonghornFX Technical Analysis
Jan 23, 20244 min

Daily Price Outlook

Despite the bullish US dollar, the AUD/USD currency pair has maintained its upward trend and remained well bid around the 0.6588 level. The reason for this upward trend can be attributed to the improved National Australia Bank's Business Confidence. The enhanced Business Confidence from the National Australia Bank might have contributed to supporting the Aussie Dollar. Additionally, the Australian Dollar could find support from the improved performance of Australia's share market. In contrast, the US Dollar (USD) managed to strengthen despite lower US Treasury yields, exerting some pressure on the AUD/USD pair.

Australian Economic Landscape and RBA Speculations Impacting AUD/USD Pair

It's worth noting that Australia's currency is facing challenges due to speculation about potential early interest rate cuts by the Reserve Bank of Australia (RBA). This speculation arises from recent indicators like lower Aussie Consumer Confidence and Employment Change figures, raising concerns about the economic outlook.

Australia's sovereign wealth fund Chair, Peter Costello, mentioned that inflation in Australia is showing early signs of slowing down. However, he highlights that there's still a long way to go to bring prices back within the RBA's target range of 2.0% to 3.0%. Despite a slight dip in National Australia Bank's Business Conditions, Business Confidence improved.

Australia's Consumer Inflation Expectations remained stable at 4.5% in January. Meanwhile, the People's Bank of China maintained its Loan Prime Rate unchanged for both one-year and five-year terms. The rates remain at 3.45% for one year and 4.20% for five years.

Therefore, the speculation on early interest rate cuts by the RBA, coupled with concerns about economic indicators, may weigh on the AUD/USD pair. Improved business confidence and stable inflation expectations offer some support amid uncertainties.

US Fed Stance and Economic Indicators: Potential Impacts on USD and AUD/USD Pair

Furthermore, San Francisco Fed President Mary Daly believes there's still significant work to be done in bringing inflation back to the 2.0% target. She made it clear that considering interest-rate cuts right now is premature. Similarly, Atlanta Fed President Raphael Bostic, before the upcoming rate meeting on January 31, reiterated his stance on potential rate cuts.

Bostic emphasized being open to adjusting his outlook based on data, highlighting the Fed's data-dependent approach. In economic news, the preliminary US Michigan Consumer Sentiment Index for January exceeded expectations, rising to 78.8 from 69.7. On the housing front, US Existing Home Sales decreased by 1.0% in December, while Housing Starts surpassed expectations, reaching 1.46 million.

Therefore, the cautious stance on rate cuts from US Fed officials, coupled with positive consumer sentiment, might support the USD against the AUD. However, housing data variations could introduce some volatility to the AUD/USD pair.

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

AUD/USD - Technical Analysis

The Australian dollar exhibits buoyancy, appreciating by 0.49% to 0.66011 against the US dollar. This uptick places the AUD/USD pair above the pivotal $0.6610 mark, which could act as a springboard for further gains. The pair faces successive resistance levels at $0.6695, $0.6792, and $0.6877 that may stall the climb. Conversely, supports at $0.6513, $0.6428, and $0.6331 provide layers of defense against declines.

The RSI indicator reads at 53, signaling neither overbought nor oversold conditions, suggesting equilibrium in buying and selling pressures. The MACD hovers at 0.00045, just breaching its signal line, hinting at possible upward momentum for the currency pair, albeit the crossover is minimal and warrants confirmation for a solid trend.

The 50-day EMA at $0.6588 currently supports the price, potentially reinforcing the uptrend. However, chart patterns do not offer a clear direction at present, leaving the next significant move open to interpretation. Given these factors, a conservative approach suggests potential for a bearish reversion below $0.6610, recommending a sell below 0.66172, with a take-profit at 0.65702 and a stop-loss at 0.66432.

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