On the Verge of a Break: AUD/USD Analysis and Forecast

Explore the potential break-in and analysis of AUD/USD, providing insights and forecasts for informed decision-making.

ANALYSIS & HIGHLIGHTS for AUD/USD

The recent Australian retail sales figures indicate that the high-interest rate environment might negatively affect consumers.

Later today, the focus will be on US economic data and speeches from Federal Reserve officials.

A break below the 200-day Moving Average (MA) for AUD/USD could expose long-term trendline resistance.

FUNDAMENTAL BACKGROUND OF THE AUSTRALIAN DOLLAR

The Australian dollar’s response to this morning’s retail sales report suggests a return to negative territory, indicating a potential impact of the current restrictive monetary policy on the Australian economy, particularly households. While one data point does not establish a trend, the continued decline in spending habits could prompt the Reserve Bank of Australia (RBA) to address lower inflation. RBA Governor Bullock expressed a cautious stance in her statements:

“We’re in a period where we must be a bit careful.”

“I want to avoid imposing too much and pushing up the jobless.”

“We need to ensure that inflation expectations stay anchored.”

“Monetary policy is restrictive and is dampening demand.”

On the Verge of a Break: AUD/USD Analysis and Forecast

Meanwhile, PBoC’s Governor Pan’s statement on accommodating monetary policy may have supported the pro-growth Australian dollar.

RBA money market pricing indicates the possibility of an additional interest rate hike, underscoring the importance of forthcoming data.

From a US perspective, recent bond auctions saw yields fall, making the sale less attractive for investors. The depressed 2-year Treasury yield has supported the AUD against the subdued US dollar. Fed rate cut expectations are rising, contributing to a bearish 2024 outlook for the USD.

Looking at AUD/USD, the recent break above the 200-day moving average resistance is noteworthy, with the pair approaching the 0.6596 swing high. The Relative Strength Index (RSI) nearing overbought territory suggests the potential for further upside, possibly coinciding with the long-term trendline resistance zone before a potential pullback. However, the current daily candle with a long upper wick may indicate downside risk if the daily close remains as such.

Key Levels

Resistance: 0.6700 (Trendline resistance), 0.6596

Support: 0.6500 (200-day MA), 0.6459, 0.6358 (50-day MA)

IG CLIENT SENTIMENT DATA

IG Client Sentiment (IGCS) shows that retail traders are currently net LONG on AUD/USD, with 55% holding long positions.

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