Technical Analysis

AUD/USD Price Analysis – Jan 25, 2024

By LonghornFX Technical Analysis
Jan 25, 20244 min

Daily Price Outlook

Despite the bullish US dollar, the AUD/USD currency pair managed to halt its downward trend and attracted some modest bids around the $0.6580 level. The upward movement can be attributed to the release of improved preliminary Purchasing Managers Index (PMI) data from Australia on Wednesday.

In contrast to this, the release of positive S&P Global Purchasing Managers Index (PMI) data from the United States could decrease the probability of rate cuts by the Federal Reserve (Fed) in March. This, in turn, could boost the US dollar and cap gains in the AUD/USD pair.

RBA Economic Signals and Mixed Data Impact on AUD/USD Pair

It's worth noting that the Reserve Bank of Australia's (RBA) Bulletin indicates that businesses expect a slowdown in price growth over the next six months. They anticipate prices to remain above the RBA's target range of 2.0–3.0%. Meanwhile, the Manufacturing PMI rose from 47.6 to 50.3, signaling improvement, while the Services PMI increased from 47.1 to 47.9. The Composite PMI also went up to 48.1. However, Australia's Westpac Leading Index decreased by 0.03% in December.

In the meantime, National Australia Bank's Business Conditions slightly dropped to 7 in December, while Business Confidence improved to -1. Australia’s Consumer Inflation Expectations held steady at 4.5% in January. However, the Chair of Australia's sovereign wealth fund, Peter Costello, mentioned that inflation is showing early signs of moderation, but there's still work to be done to bring prices back within the RBA's target band.

Therefore, the RBA's indication of a slowdown in price growth, along with mixed economic data, could create uncertainty for the AUD/USD pair. Traders may watch closely for further developments in inflation and business conditions.

US Dollar's Recovery and Challenges Amidst Risk-On Market Sentiment

Moreover, the US Dollar is trying to bounce back despite lower US Treasury yields. However, the US Dollar (USD) faces challenges due to a risk-on market sentiment ahead of the Federal Reserve's (Fed) January 31 interest rate decision. Investors are eyeing Thursday's preliminary US Gross Domestic Product Annualized release, expected to show a Q4 reading of 2.0%, down from the previous 4.9%. This data offers insights into overall economic performance, impacting market expectations on the Fed's monetary policy stance.

Notably, positive US S&P Global Manufacturing and Services PMI, along with an improved Consumer Sentiment Index, help the US dollar regain its strength, which is seen as a key factor that could cap further gains in the AUD/USD pair.

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

AUD/USD - Technical Analysis

In the current forex landscape, the AUD/USD pair is showing a marginal decline, trading at 0.65745, down by 0.04%. The pair's technical outlook hinges around the pivot point at $0.6516, which serves as a crucial indicator of the pair's short-term directional bias.

Resistance levels for the AUD/USD are set at $0.6609, $0.6695, and $0.6791. These levels represent potential ceilings where selling pressure might intensify. On the downside, immediate support is found at $0.6427, with further cushions at $0.6334 and $0.6239, acting as safety nets against bearish movements.

The Relative Strength Index (RSI) at 45 suggests a neutral market sentiment. Meanwhile, the Moving Average Convergence Divergence (MACD) stands at 0.0 with its signal line at -0.00027, indicating a possible shift in momentum. The 50-Day Exponential Moving Average (EMA) is currently at $0.6585, slightly above the current market price.

Considering these indicators, the overall trend for the AUD/USD seems to be tilting towards neutrality with a slight bearish inclination. A prudent trading strategy could be to set a sell limit at 0.65970, with a take profit target at 0.65307 and a stop loss at 0.66361, carefully balancing potential risks and rewards.

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