Technical Analysis

AUD/USD Price Analysis – Oct 12, 2023

By LonghornFX Technical Analysis
Oct 12, 20234 min

Daily Price Outlook

The AUD/USD currency pair struggled to maintain its intraday gains and lost some of its gains despite some positive news regarding Australian Consumer Inflation Expectations. It's worth noting that the most recent report from the Melbourne Institute showed a modest increase in October, with expectations standing at 4.8%, a slight improvement from the previous month's 4.6%. However, this uptick can be attributed to rising oil prices, particularly the surge in petrol costs, which are influencing consumer expectations for the near future.

Despite these factors, the AUD/USD pair faced challenges, possibly due to concerns related to a potential interest rate hike by the Reserve Bank of Australia (RBA).

USD Struggles Amidst Low Treasury Yields and Fed Uncertainty

The broad-based US dollar is currently facing challenges around the 105.70 mark, thanks to the low US Treasury yields. Despite strong economic indicators, there's a prevailing uncertainty regarding the potential for an upcoming interest rate hike by the US Federal Reserve. In September, the Producer Price Index (PPI) exceeded expectations, and the core PPI also displayed an upward trend. Surprisingly, US Treasury bond yields took a dip, with the 10-year yield settling at 4.54%.

The Federal Reserve officials is currently grappling with internal disagreements. Some members support for maintaining high interest rates for an extended duration, and others want to raise them more quickly. However, this decision depends on how prices for things are changing - if they go up a lot, it could affect their choice. This Thursday, we will get more information about how prices are changing and how many people are asking for unemployment help. This will help us understand what the US dollar and the people who make decisions about money might do soon.

RBA's Interest Rate Hike Speculations Provide Tailwinds

Another key factor contributing to the Australian Dollar's strength is the growing speculation of an impending interest rate hike by the Reserve Bank of Australia (RBA). The RBA has been carefully keeping an eye on economic conditions, and the idea of adjusting monetary policy to address increasing inflation is gaining traction. The current rate sits at 4.10%, and there is growing anticipation that it could move higher.

A potential interest rate hike would make the AUD more attractive to investors seeking higher yields, thus contributing to its strength. This anticipation is one of the key factors supporting the AUD/USD pair. However, it's essential to watch for developments from the RBA and their future monetary policy decisions.

Geopolitical Tensions and Their Impact on AUD/USD Pair

Furthermore, the losses in the AUD/USD pair were further bolstered by the geopolitical tensions, especially those arising from the ongoing conflict in the Middle East. These geopolitical issues tend to undermine rikier assests like Australian dollar and disrupt the currency pair's direction.

Conversely, the geopolitical conflicts often boost demand for commodities, particularly energy and gold. Australia is a key player in the global commodities market, and the increased demand for these resources is positively impacting the Australian Dollar.

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

AUD/USD - Technical Analysis

On October 12, the AUD/USD pair exhibited a modest uptrend, marking a 0.08% gain to position itself at 0.64205, as captured in the 4-hour timeframe. The pivot point for the currency pair stands decisively at 0.6372.

In the realm of resistance, the AUD/USD faces an immediate barrier at 0.6457, with subsequent levels at 0.6530 and then at 0.6617. On the downside, the first line of defense is at 0.6296, followed by supports at 0.6212 and further to 0.6138.

Diving into the technical indicators, the Relative Strength Index (RSI) is currently at 57, signifying a somewhat bullish sentiment without being in the overbought territory. The Moving Average Convergence Divergence (MACD) presents a reading of -0.00008 against its signal line at 0.00135. This suggests a potential for downward momentum, although it's marginal and might require careful observation. Notably, the pair is trading just above its 50-day Exponential Moving Average (EMA) valued at 0.6392, hinting at a short-term bullish trajectory.

In wrapping up, the AUD/USD portrays a bullish sentiment as long as it remains above the 0.6392 mark. However, given the close proximity of the current price to this threshold and mixed technical signals, traders should exercise caution. The near-term forecast anticipates the pair testing the immediate resistance levels, but market participants would do well to closely monitor global economic events and technical indicators to make informed decisions.

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