Technical Analysis

AUD/USD Price Analysis – Nov 21, 2023

By LonghornFX Technical Analysis
Nov 21, 20234 min

Daily Price Outlook

The AUD/USD currency pair continued its upward momentum for the third consecutive session and drew some further bids on Tuesday. However, this rally was mainly driven by hawkish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock. Furthermore, the uptrend in the AUD/USD pair was further reinforced by the hawkish tone evident in the RBA's November meeting minutes, as well as the rise in commodity prices. In the meantime, Investor optimism regarding potential additional stimulus measures in China further contributed to the strengthening of the Australian dollar against the US dollar.

Australian Economic Landscape and RBA's Monetary Policy Outlook

It is worth noting that Michele Bullock, the governor of the Reserve Bank of Australia, has highlighted the strength of Australia's job market, expressing confidence in the ongoing positive trend in employment. Bullock also points out that the inflation challenge is not just about supply issues but also about underlying demand. According to her, it is a significant concern for the next couple of years.

During their November meeting, the Reserve Bank of Australia acknowledged a solid reason to hold off on an immediate interest rate increase. However, they also recognized a stronger argument in favor of raising rates due to increasing inflation risks. They highlighted that the decision to raise rates would depend on a thorough examination of data and risk assessment.

In October, Australia experienced a noteworthy surge in employment, adding 55,000 jobs, surpassing the market's anticipated 20,000. The unemployment rate remained steady at 3.7%, aligning with expectations. The Wage Price Index also saw the anticipated growth of 1.3%, with the yearly data reflecting a 4.0% increase, slightly exceeding the expected 3.9%.

Hence, the positive economic indicators, including strong job market and inflation concerns, will strengthen the AUD/USD pair, showing confidence in Australia's economic outlook.

Global Economic Overview and Monetary Policy Developments

On the U.S. front, in October, the Consumer Price Index (CPI) reported lower figures than expected, with the annual rate declining from 3.7% to 3.2%, below the anticipated 3.3%. The monthly CPI also saw a decrease from 0.4% to 0.0%. The Core CPI in the U.S. increased by 0.2%, falling short of the expected 0.3%, and the annual rate dropped to 4.0% from the preceding 4.1%.

Moreover, Boston Federal Reserve (Fed) President Susan Collins expresses optimism that the Fed can address inflation without negatively impacting the job market through a "patient" approach to interest rates.

The broad-based US dollar has been losing ground and declined to three-month lows, influenced by heightened risk appetite and lower U.S. Treasury yields. This was seen as a crucial factor contributing to the continued strength of the AUD/USD pair. Looking ahead, investors are eyeing U.S. Existing Home Sales and the Chicago Fed National Activity Index.

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

AUD/USD - Technical Analysis

The AUD/USD pair exhibits an optimistic demeanor as the dawn of the trading week witnesses a 0.37% rise, positioning the currency at 0.65826. The ascent comes amidst a broader currency market recalibration, as traders dissect and digest the latest economic symposiums and policy pivots.

At the forefront of resistance, the Aussie dollar eyes the 0.6662 mark with an anticipatory gaze, and beyond lies the challenges at 0.6777 and 0.6895—levels that test the resolve of bulls in the market. Conversely, a narrative of supports unfolds at 0.6469, with subsequent thresholds at 0.6397 and 0.6282, standing by to uphold the currency should it encounter bearish sentiment.

Amidst the technical tableau, the Relative Strength Index (RSI) broadcasts a strong signal at 73, venturing into overbought realms yet depicting a market with an appetite for risk. The MACD corroborates this stance with a positive divergence, hinting at continued propulsion. Notably, the currency's dance above the 50-day EMA of 0.6550 lends credence to the bullish tune.

The charted course reveals an upward channel breakout, a pattern often associated with robust buying interest and bullish continuance. Thus, the currency is set on a trajectory that might soon see it grapple with the immediate resistance laid out at 0.6662.

In summation, the Australian dollar's stance is firmly bullish, anchored above a well-established pivot of 0.6587. The session ahead is ripe with the potential for testing established resistances, contingent on market sentiment and economic undercurrents.

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