Technical Analysis

AUD/USD Price Analysis – March 05, 2024

By LonghornFX Technical Analysis
Mar 5, 20244 min

Daily Price Outlook

Despite the bearish US dollar, the AUD/USD currency pair was unable to halt its previous session's losing streak and remained under pressure around 0.6490. However, the bearish bias could be attributed to the risk-off market sentiment, which tends to undermine riskier assets like the Australian Dollar (AUD) and contributed to the AUD/USD pair's losses. On the other side, the Chinese Services PMI contraction to 52.5 in February from 52.7 prior could potentially impact AUD/USD negatively. This is because Australia's economy is closely tied to China's, and weaker Chinese data may reduce demand for Australian exports, putting pressure on the Australian dollar against the US dollar.

In contrast to this, the positive performance of the Judo Bank Services PMI, reaching a ten-month high and indicating expansion, was seen as a key factor that could help the AUD/USD pair to limit its losses. On the data front, the Judo Bank Services Purchasing Managers Index (PMI) hit a ten-month high of 53.1 in February, signaling expansion. The Composite PMI also rose to 52.1, the highest in nine months. Traders are eagerly anticipating the release of fourth-quarter 2023 Gross Domestic Product (GDP) data on Wednesday.

Australian Economic Indicators and Impact on AUD/USD Pair

Despite the Judo Bank Services Purchasing Managers Index (PMI) surging to a ten-month high of 53.1 in February, indicating expansion, the Australian Dollar remained under pressure. Besides this, the Composite PMI rose to 52.1, marking a nine-month high. However, the Australian Current Account Balance exceeded expectations at 11.8 billion in the fourth quarter of 2023.

According to the Australia Melbourne Institute, inflation slowed to a 4.0% year-over-year rise in February. Additionally, the ANZ-Roy Morgan Australian Consumer Confidence index dropped to 81.0, the lowest in 2024. Building permits and inflation had mixed results, with monthly figures declining but yearly metrics improving.

Meanwhile, the Manufacturing PMI showed a slight uptick to 47.8, while Retail Sales and Private Capital Expenditure improved. Economist Matthew De Pasquale notes the Services PMI's implication of a soft landing in 2023, with a resurgence in early 2024, though inflation's return to target remains uncertain.

Therefore, the impact of the data on the AUD/USD pair could be mixed as positive indicators like the PMI surges and strong current account balance could support the Australian Dollar, potentially leading to an increase in the AUD/USD pair. However, the drop in consumer confidence and uncertainty around inflation could cap gains in the AUD/USD pair.

Impact of Bearish US Dollar and Geopolitical Tensions on AUD/USD Pair

On the other side, the bearish US dollar was another factor that could help the AUD/USD pair. On the US front, the broad-based US dollar continued its declining rally and remained bearish in the wake of disappointing US macro data on Friday, along with less hawkish comments by Federal Reserve officials.

Apart from this, the risk-off market sentiment, pressured by geopolitical tensions, undermined riskier assets like the Australian Dollar (AUD), keeping the AUD/USD currency pair under pressure. The increasing tensions in the Middle East dampened risk sentiment, which affected the Australian Dollar. Since October 7, Israeli attacks on Gaza have injured over 30,000 Palestinians, while Hamas attacks in Israel have killed 1,139 people.

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

AUD/USD - Technical Analysis

The AUD/USD pair experienced a slight decline on March 5th, settling at 0.65016, marking a 0.11% decrease. This subtle movement reflects the pair's current volatility and the ongoing assessment of its position relative to its pivot point and key technical indicators.

The pivot point, established at 0.6486, delineates the immediate battleground for AUD/USD, with resistance levels positioned at 0.6527, 0.6566, and 0.6608, suggesting areas where upward momentum might face challenges. Support levels at 0.6447, 0.6407, and 0.6365 indicate potential cushioning zones against further declines, outlining critical points for the currency pair's short-term trajectory.

Technical indicators provide a nuanced view of the market's direction. The Relative Strength Index (RSI) at 42 hints at neither overbought nor oversold conditions, suggesting a relatively balanced market sentiment. The MACD's slight crossover above the signal line (Value: -0.0004, Signal: -0.0005) intimates potential for upward momentum, albeit within a context of overall market caution.

The 50-day EMA, stationed at 0.6511, hovers just above the current price, reinforcing a close contest between buyers and sellers. The outlined trading strategy suggests a bearish inclination with an entry price for selling below 0.64939, a take-profit target at 0.64711, and a stop loss set at 0.65086. This setup underscores the anticipation of minor adjustments within a tightly held trading range, indicating a cautious approach amid the current market dynamics.



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