The AUDUSD pair is cautiously navigating its course, marked by a flat current session, attempting to secure a fifth consecutive green close. On the one hand, the Reserve Bank of Australia (RBA) minutes released earlier today hinted at the possibility of further rate hikes, reflecting concerns about persistent inflation. This could bolster the AUD against the US Dollar (USD) by attracting yield-seeking investors. Additionally, the recent improvement in the ANZ-Roy Morgan Consumer Confidence Index suggests a more optimistic outlook for the Australian economy, potentially fuelling AUD demand.
However, headwinds also loom. The RBA minutes acknowledged the need for more time to confidently assess the inflation trajectory, indicating a cautious approach to future rate hikes. This could dampen AUD’s enthusiasm. Additionally, the lack of a significant reaction to the RBA minutes and the weaker performance of the S&P/ASX 200 index raise concerns about the broader market sentiment towards the AUD.
Furthermore, the PBoC’s decision to maintain its one-year LPR but cut the five-year LPR by 25 basis points could impact AUD sentiment. While this move aims to support the Chinese economy, a potential slowdown in China, a major trading partner for Australia, could indirectly weigh on the AUD.
Technical Analysis:
On the 4-hour chart, the AUDUSD trades around 0.65334, just above key SMAs. The price action trades just above the 20-SMA (green line) and 50-SMA (blue line), with the 100-SMA (orange line) sloping slightly downwards above both. This indicates a mixed trend with some recent bullish momentum.
The RSI sits comfortably above 50 at 55.82, suggesting possible upside potential but lacking a clear directional bias. A sustained break above 0.65652 could push prices towards the 0.65969 resistance level, potentially extending to 0.6621 (23.60% Fibonacci retracement).
Conversely, a break below the SMAs and initial support at 0.65037 could lead to the 0.64770 support level and potentially extending to the major support at 0.64427.
Summary
The AUDUSD’s short-term direction remains uncertain. Bullish factors like a cautious RBA and China’s rate cut might be countered by the USD’s strength and domestic headwinds. Technically, the flat RSI indicates potential price stability near key support and resistance levels. Breakout or breakdown from these levels could trigger short-term trading opportunities within a 0.65969-0.64427 range.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reserve Bank of Australia, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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