Technical Analysis

AUD/USD Price Analysis – March 28, 2024

By LonghornFX Technical Analysis
Mar 28, 20244 min

Daily Price Outlook

During the early European session, the AUD/USD currency pair experienced a downward trend and remained well offered around the 0.6500 level. However, the reason for its downward trend can be attributed to various factors, including downbeat Consumer Inflation Expectations and Retail Sales figures from Australia, which raised concerns about the country's economic outlook and the potential for interest rate cuts by the Reserve Bank of Australia. Furthermore, the cautious sentiments from members of the Federal Reserve regarding the timing of rate cuts contributed to the pressure on the Australian dollar against the US Dollar.

In addition to this, the risk-off market sentiment triggered by ongoing conflicts such as the Russia-Ukraine war and tensions in the Middle East, particularly between Israel and Palestine, was seen as another key factor that undermined the riskier asset Australian dollar and kept the AUD/USD currency pair down.

Softer Consumer Inflation Expectations and Retail Sales Figures

As mentioned, the AUD/USD currency pair has been declining amid expectations that the Reserve Bank of Australia might lower interest rates in 2024. This view was reinforced by weaker Consumer Inflation Expectations and Retail Sales in Australia. Moreover, the Australian Monthly Consumer Price Index for February fell short of expectations, sparking concerns about Australia's economy. These worries have contributed to pushing the AUD/USD pair lower.

On the data front, Australia's consumer expectations for future inflation dropped slightly to 4.3% in March, down from the previous 4.5% rise. In the meantime, February's Retail Sales increased by 0.3% from the previous month, but it fell short of the expected 0.4% and the earlier 1.1% jump. Plus, Australia's Monthly Consumer Price Index for February showed a 3.4% year-on-year increase, just below the anticipated 3.5%. Meanwhile, Westpac Consumer Confidence decreased to 84.4 in March from February's 86.0, after hitting a 20-month high.

On the positive side, the Westpac Leading Index rose by 0.1% in February. The government aims to raise the minimum wage in line with inflation this year to help low-income families cope with rising living costs. Therefore, the AUD/USD pair faced downward pressure as Australia's softer consumer inflation expectations, lower-than-expected retail sales, and slightly below-anticipated CPI figures heightened concerns about the country's economic outlook.

Federal Reserve's Cautious Stance on Interest Rates

On the US front, Federal Reserve Board Governor Christopher Waller's hawkish stance on interest rates also affected the performance of the AUD/USD currency pair by underpinning the US dollar. Despite sticky inflation data, Waller expressed a no-rush approach to cutting rates. This cautious stance suggested that the Federal Reserve might not be quick to implement monetary policy easing measures, which could support the US Dollar and contributes to the declines in the AUD/USD pair.

Moreover, Some Federal Reserve members, like Bostic and Cook, said cutting rates too soon could make inflation worse. Goolsbee, from Chicago Fed, leaned toward cutting rates but wants to see proof that inflation is getting better first.

Therefore, the AUD/USD pair faced pressure as Federal Reserve officials, including Christopher Waller, signaled a cautious approach to rate cuts despite inflation concerns, bolstering the US Dollar against the Australian Dollar.

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

AUD/USD - Technical Analysis

The AUD/USD pair has experienced a slight decrease, down by 0.12%, with its price settling at 0.6528. Amidst fluctuating market conditions, the Australian dollar struggles to maintain its foothold against the US dollar, as investors remain cautious ahead of potential shifts in monetary policy and economic indicators. The pivot point at 0.6541 signifies a critical juncture for AUD/USD, where its future trajectory could be decided. Resistance levels at 0.6572, 0.6598, and 0.6630 present hurdles for any bullish momentum, while support levels at 0.6504, 0.6478, and 0.6448 offer a cushion against further declines.

Technical indicators suggest a challenging environment for AUD/USD. The 50-day Exponential Moving Average (EMA) at 0.6543, just above the current price, acts as a barrier to upward movement. Furthermore, the Relative Strength Index (RSI) standing at 46, below the midpoint of 50, indicates a bearish sentiment within the market. This confluence of technical signals hints at potential weakness, suggesting that the pair might face downward pressure in the short term.

Considering these factors, the outlook for AUD/USD appears tilted towards bearishness below the pivot point of 0.6541. Traders might consider a sell strategy below the specified entry price of 0.65409, targeting a pullback to 0.65044 while setting a stop loss at 0.65611 to mitigate risk.

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