Technical Analysis

AUD/USD Price Analysis – Oct 17, 2023

By LonghornFX Technical Analysis
Oct 17, 20234 min

Daily Price Outlook

The AUD/USD currency pair extended its gains for the second consecutive day, maintaining its strength against the US Dollar on Tuesday. This upward momentum was bolstered by the release of the hawkish Reserve Bank of Australia (RBA) minutes from the October 2023 meeting. Following the release of these minutes, the Australian Dollar continued to rise. Notably, the RBA board members expressed a preference for keeping the current interest rates unchanged.

Additionally, the US Dollar Index (DXY) faced downward pressure, primarily due to dovish comments made by several Federal Reserve officials. These remarks indicated that no further interest rate hikes were expected for the rest of 2023. Hence, this dovish stance by the Fed was another significant factor contributing to the AUD/USD pair's upward movement.

RBA's Interest Rate Decision and Economic Outlook

It's important to highlight that the Reserve Bank of Australia (RBA) recently deliberated on whether to raise interest rates by 25 basis points (bps) or leave them unchanged. They ultimately opted to keep the current rate, citing factors such as inflation data, employment figures, and forthcoming forecasts for the November meeting. The RBA is exercising caution due to potential inflation risks.

In terms of consumer sentiment, the Australian Weekly ANZ Roy Morgan survey revealed a decline in Consumer Confidence, falling from 80.1 to 76.4. This decline signals a more pessimistic outlook among consumers.

Despite government stimulus measures and ongoing Middle East conflicts, the Australian economy is grappling with challenges that could lead the RBA to consider implementing a 25 basis points (bps) interest rate hike, potentially reaching 4.35% by year-end. Additionally, the RBA is actively exploring the possibility of introducing a central bank digital currency (CBDC), a topic discussed by Brad Jones, the Assistant Governor (Financial System) at the RBA. On a different note, Chinese inflation declined in September, which may have repercussions for the Australian Dollar.

Current Factors Affecting the US Dollar and Upcoming Market Trends

Moreover, the US Dollar Index (DXY) is experiencing downward pressure, primarily due to remarks from multiple Federal Reserve officials indicating their intention to keep interest rates unchanged throughout the remainder of 2023. This cautious stance highlights the Federal Reserve's hesitancy to tighten monetary policy in the current economic climate.

Federal Reserve Bank of Philadelphia President Patrick Harker reinforced this sentiment by cautioning against increasing borrowing costs, especially in the absence of substantial shifts in economic data.

Consequently, investors are proceeding with caution when it comes to making significant bets on the US Dollar, given the uncertainty surrounding the Federal Reserve's interest rate decisions, which has created a sense of hesitation in the market.

Another factor offering support to the US Dollar is the rebound in US Treasury yields, currently at 4.72%. Furthermore, the US Dollar gains from its status as a safe-haven currency, especially during periods of heightened tension like the ongoing situation between Israel and Palestine.

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

AUD/USD - Technical Analysis

On October 17, the AUD/USD currency pair is observed to trade at a value of 0.6350, showing an increment of almost 0.13% during the Asian trading session. This performance, as visualized on a 4-hour chart timeframe, presents several key price determinants that traders need to keep an eye on. The pivot point is identified at 0.6359. For those looking at potential hurdles, immediate resistance is pinpointed at 0.6376, followed by stronger resistance levels at 0.6400 and 0.6432. Conversely, immediate support for the pair is located at 0.6341, with further cushions at 0.6320 and a significant support point at 0.6287.

Turning attention to the technical indicators, the Relative Strength Index (RSI) reads at 59. This denotes a moderately bullish sentiment as the RSI value is above the halfway point of 50. This might indicate the presence of more buyers than sellers in the recent trading sessions.

The 50-Day Exponential Moving Average (EMA) is mapped at 0.6347. With the AUD/USD trading slightly above this marker, it suggests a short-term bullish inclination. However, the pair's current location, particularly with the completion of the 50% Fibonacci retracement at $0.6355 and the appearance of a Doji candlestick pattern right below this retracement, hints at potential selling pressure.

In terms of chart patterns, the aforementioned Doji candlestick beneath the 50% Fibonacci level seems to advocate for selling. This could indicate a pause or indecision among traders after recent price movements, and might even hint at a potential reversal.

To encapsulate, while there's a semblance of bullish momentum, the overall trend for AUD/USD appears bearish, especially if it moves beneath the 0.6359 pivot. If this bearish sentiment holds, we can anticipate the asset to test the aforementioned support levels soon.

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