Technical Analysis

AUD/USD Price Analysis – July 11, 2024

By LonghornFX Technical Analysis
Jul 11, 20244 min

Daily Price Outlook

During the European trading session, the AUD/USD currency pair maintained its upward momentum, staying strong around the 0.6759 level and peaking at an intraday high of 0.6764. This upward movement can be attributed to several factors.

Firstly, there is increasing speculation that the Reserve Bank of Australia (RBA) may postpone joining the global trend of interest rate cuts or even consider raising rates, which has bolstered demand for the Australian dollar and supported gains in AUD/USD.

Secondly, weakness in the US dollar also contributed as market expectations lean towards the Federal Reserve initiating interest rate cuts starting in September, undermining the greenback's strength.

Looking ahead, traders are exercising caution in taking significant positions as they await the release of the latest consumer inflation figures from the United States (US).

The upcoming US CPI report is expected to be closely monitored for insights into the Federal Reserve's approach to potential rate cuts, which could influence demand for the US dollar and significantly impact commodity markets.

Impact of Economic Data and Speculation on AUD/USD Pair

Despite soft Consumer Inflation Expectations reported by the Melbourne Institute for July, reflecting subdued consumer outlook on inflation over the next year, the AUD/USD pair has displayed upward movement.

This rise can be attributed to increasing speculation that the Reserve Bank of Australia (RBA) may delay joining the global trend of interest rate cuts or possibly even consider raising rates again.

Recent data indicates a decline in Australian consumer confidence for July, contrasting with a surge in business sentiment to a 17-month high in June, highlighting divergent economic outlooks.

On the data front, Australia's Consumer Inflation Expectations for July eased slightly to 4.3% from the previous 4.4%. Meanwhile, China, a key trade partner, reported a 0.2% annual increase in its Consumer Price Index (CPI) for June, down from 0.3% in May and below market expectations of 0.4%.

On a monthly basis, Chinese CPI declined by 0.2% in June, contrasting with a 0.1% decrease in May and missing the anticipated 0.1% drop.

Additionally, Australia's Westpac Consumer Confidence fell by 1.1% in July following a 1.7% increase in June, marking the fifth decline this year amid concerns over elevated inflation, interest rates, and economic growth.

Therefore, the AUD/USD pair exhibited upward movement, driven by speculation that the RBA may postpone rate cuts or even consider raising rates. The contrasting economic outlooks, with lower consumer confidence but higher business sentiment, also played a role in shaping its trajectory.

Impact of Fed Expectations and CPI Data on AUD/USD Pair

On the US front, the broad-based US dollar continues to weaken and remains bearish amid mounting expectations that the Federal Reserve will commence interest rate cuts starting in September, potentially followed by additional cuts in December.

Fed Chair Jerome Powell's recent remarks have underscored this sentiment, highlighting the Fed's commitment to maintaining price stability and contemplating a move towards neutral interest rates by late 2024 as inflation trends evolve. Despite acknowledging signs of economic moderation,

On the data front, the headline Consumer Price Index (CPI) is anticipated to have risen by 0.1% in June, marking a slight easing in the annual rate from 3.3% to 3.1%. Meanwhile, Core CPI, which excludes Food and Energy prices, is expected to maintain a steady year-over-year rate of 3.4%.

Therefore, the AUD/USD pair could find support as the US dollar weakens due to expectations of Federal Reserve rate cuts, bolstered by Chair Powell's comments on stable inflation and possible interest rate adjustments. Economic data indicating moderated CPI rates in the US could further impact market sentiment.

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

AUD/USD - Technical Analysis

The Australian dollar is showing signs of strength against the U.S. dollar, trading up 0.16% at $0.6758. A closer look at the 4-hour chart reveals a bullish bias, with the Aussie perched just above a pivot point of $0.6752.

This level now serves as a crucial support zone, with a break below potentially triggering a move towards the next support levels at $0.6732, $0.6712, and $0.6697.

Conversely, the bulls have their eyes on the immediate resistance at $0.6767. A decisive move above this level could open the door for a rally towards the next resistance targets at $0.6787 and $0.6804.

The 50-day Exponential Moving Average (EMA), currently at $0.6742, is also acting as dynamic support, further reinforcing the bullish outlook.

The Relative Strength Index (RSI) is currently at 64, suggesting some room for further upside before entering overbought territory. However, traders should remain vigilant for any signs of exhaustion or reversal in momentum.

Given the current technical setup, traders could consider initiating long positions above $0.67518, with a stop-loss order placed below $0.67321. The initial target for profit-taking would be the resistance level at $0.67870.

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