Technical Analysis

AUD/USD Price Analysis – March 12, 2024

By LonghornFX Technical Analysis
Mar 12, 20245 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 is still showing sluggish performance around 0.6609. However, the sluggish bias could be attributed to the decrease in the NAB Business Confidence Index, suggesting weakened business sentiment. This could potentially impact the Australian dollar negatively due to reduced investor confidence. Furthermore, the risk-off market sentiment tends to undermine riskier assets like the Australian Dollar (AUD) and has contributed to the AUD/USD pair's losses.

In contrast, the increased trade surplus indicates a strong economy, but the slightly lower-than-expected GDP growth might temper the positive impact on the Australian dollar. Furthermore, the abolition of import tariffs is likely positive for the Australian dollar as it enhances trade efficiency, reduces business costs, and signals economic liberalization, boosting investor confidence in the currency. Meanwhile, the mixed data from China, with CPI beating expectations but PPI falling short, have a neutral impact on the Australian dollar as it reflects both positive and negative economic indicators from Australia's largest trading partner.

Impact of Australian Economic Data on AUD/USD Pair

On the data front, Australia's NAB Business Confidence Index dipped to 0 in February, down from 1 in the previous month, while the NAB Business Conditions Index improved to 10 from 7 (revised from 6). Meanwhile, the Australian Trade Balance surplus rose to $11,027 million in February, slightly below the market's expected increase to $11,500 million. GDP grew by 0.2% QoQ in Q4 2023, slightly below expectations of 0.3%, with YoY expansion at 1.5%, surpassing expectations of 1.4% but falling short of the previous 2.1% growth.

Moreover, Treasurer Jim Chalmers announced the government's plan to abolish nearly 500 import tariffs from July 1, 2024, aiming to streamline trade and save businesses over A$30 million annually in compliance costs.

Therefore, the mixed economic data, including the drop in business confidence and the slight GDP growth miss, weaken the Australian dollar (AUD) against the US dollar (USD). However, the tariff abolition announcement provide some support, potentially limiting the AUD/USD downside.

Impact of Chinese Economic Data on AUD/USD Pair

On the China front, China's Consumer Price Index (CPI) rebounded in February, rising by 0.7% year-over-year after a 0.8% decline in January, surpassing market expectations. Monthly CPI inflation also exceeded expectations, increasing by 1.0% compared to a 0.3% rise in January. However, the Producer Price Index (PPI) dropped by 2.7% year-over-year in February, a larger decline than the 2.5% seen in January and below market expectations.

Therefore, the mixed data from China, with CPI surpassing expectations but PPI weakening, could influence the AUD/USD pair. The CPI rebound might offer support to the Australian dollar (AUD) against the US dollar (USD), while concerns over deflationary pressures from the weaker PPI could weigh on sentiment.

Impact of US Economic Data and Geopolitical Tensions on AUD/USD Pair

On the US front, the weakening US dollar could support the AUD/USD pair as disappointing macro data fuels expectations of rate cuts. Federal Reserve Chair Jerome Powell hinted at potential rate reductions if inflation hovers around 2%, further dampening the dollar. Meanwhile, the upcoming US CPI report could intensify rate cut expectations, impacting dollar. Powell's remarks on inflation's influence on rate cuts add to market uncertainty, creating short-term trading opportunities for gold.

On the geopolitical front, ongoing tensions in the Middle East have created a risk-off market sentiment. This has negatively impacted riskier assets like the Australian Dollar (AUD), keeping the AUD/USD pair under pressure. However, the situation intensified with ongoing Israeli attacks on Gaza, resulting in a high number of casualties and injuries. This instability has contributed to a cautious market environment, affecting currencies like the Australian Dollar.

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

AUD/USD - Technical Analysis

The Australian Dollar against the US Dollar (AUD/USD) saw a minor uptick, registering a 0.03% increase to 0.66156. The currency pair's movement remains constrained, signaling a cautious approach among traders. A detailed look at the four-hour chart reveals a critical pivot point at 0.66162, which the AUD/USD hovers just below, indicating a delicate balance in market sentiment.

Resistance levels are outlined at 0.66506, 0.66856, and 0.67296, suggesting potential hurdles should the pair attempt an upward movement. Conversely, support is established at lower thresholds of 0.65733, 0.65348, and 0.64777, marking zones where declines may be arrested. The Relative Strength Index (RSI) at 57 denotes a neutral market condition, neither overbought nor oversold, supporting the potential for either direction.

Additionally, the 50-day Exponential Moving Average (EMA) at 0.65746, slightly below the current price, could offer a foundation for support. However, the presence of several Doji candles below the pivot point of 0.6616 hints at indecision and a potential tilt towards slight selling pressure.

Given these dynamics, the overall outlook suggests a cautious bearish sentiment for the AUD/USD pair. Traders might consider a selling strategy below the pivot point of 0.66161, targeting a take profit level at 0.65755, with a stop loss placed at 0.66357. This recommendation aligns with the observed technical patterns and the current stance of the market indicators.

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