Technical Analysis

AUD/USD Price Analysis – March 21, 2024

By LonghornFX Technical Analysis
Mar 21, 20244 min

Daily Price Outlook

The AUD/USD currency pair maintained its upward rally and remained well bid around the 0.6631 level. The reason for its upward trend can be attributed to the risk-on market sentiment, which tends to underpin the Australian dollar and contribute to the gains of the AUD/USD currency pair. Apart from this, positive employment data from Australia was seen as another key factor that kept the AUD/USD pair higher, as it indicates a strong economy, boosting investor confidence in the Australian dollar (AUD), leading to increased demand and a higher value against the US dollar (USD).

Moreover, the bearish US dollar, driven by the dovish Fed outlook, has played a major role in underpinning the AUD/USD currency pair. The Federal Reserve plans to reduce interest rates by 75 basis points throughout the year, signaling a commitment to accommodative monetary policy in response to economic conditions. This weakens the US dollar and potentially strengthens the AUD/USD pair.

Australian Economic Indicators Impact Currency Markets

On the data front, Australian Employment Change for February surged to 116.5K, exceeding expectations of 40.0K and the previous figure of 15.3K. However, the Unemployment Rate increased to 3.7%, lower than the expected 4.0% and the previous 4.1%. The preliminary Judo Bank Services PMI rose to 53.5 from the previous figure of 53.1, while the Composite PMI showed a slight uptick to 52.4 compared to the previous 52.1.

Hence, the positive employment data from Australia, including a surge in employment change and a lower-than-expected unemployment rate, likely strengthened the Australian Dollar (AUD) against other currencies, potentially leading to gains in the AUD/USD currency pair.

China's Monetary Policy Stability and Positive China-Australia Relations Boost AUD Confidence

On the China front, the People’s Bank of China (PBoC) maintaining its interest rate at 3.45% suggests stability in China's monetary policy, influencing investor sentiment towards the Australian Dollar (AUD). Additionally, the positive tone from the meeting between Chinese Foreign Minister Wang Yi and Australia's Foreign Affairs Minister Penny Wong, highlighting the strong potential and positive trajectory of China-Australia relations, could bolster confidence in the AUD.

US Interest Rate Expectations and Economic Data Impact AUD/USD Exchange Rate

On the US front, the value of the US dollar didn't continue its recent rise and fell on Thhursday. This drop happened because the Federal Reserve announced a plan to cut interest rates three times this year. This could lead to a relative strength in the Australian dollar (AUD) against the US dollar (USD), causing the AUD/USD pair to remain higher.

On the data front, US Building Permits for February increased to 1.518 million, surpassing the expected 1.495 million and the prior figure of 1.489 million. Meanwhile, the housing Starts also saw a rise to 1.521 million from the previous 1.374 million, beating the anticipated 1.425 million. However, the preliminary Michigan Consumer Sentiment Index for March dipped to 76.5 from 76.9, contrary to expectations of no change.

Hence, the positive data on building permits and housing starts might influence the Fed's interest rate decision by indicating strong economic activity.

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

AUD/USD - Technical Analysis

The AUD/USD pair experienced a notable uptick in the March 21 trading session, marking a 0.62% rise to settle at 0.66257. This movement signifies a resurgence in bullish sentiment, yet the currency pair encounters a pivotal juncture at the 0.6631 pivot point. Resistance levels at 0.6649, 0.6666, and 0.6686 delineate the potential ceilings for further gains, while support levels established at 0.6597, 0.6573, and 0.6552 provide floors to cushion any downward pressures.

Technical indicators suggest a nuanced picture; the Relative Strength Index (RSI) at 71 indicates a market that is veering into overbought territory, hinting at potential pullbacks. Moreover, the formation of a double-top pattern near the 0.6630 level suggests that the Australian dollar may struggle to sustain its upward momentum, with a close beneath this pivotal mark potentially ushering in a bearish correction phase.

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