The Australian Dollar (AUD) has gained over 0.3% today, defying expectations after Australia’s GDP report revealed slower-than-expected growth of 0.2% in Q4 2023. This data, coupled with a potential delay in Reserve Bank of Australia (RBA) rate cuts, hasn’t dampened AUD’s positive momentum.
Optimistic remarks from China, Australia’s largest trading partner, have bolstered the Aussie. The National Development and Reform Commission (NDRC) and People’s Bank of China (PBoC) Governor expressed confidence in China’s 2024 growth target and hinted at potential monetary policy easing, fuelling risk appetite and supporting the AUD.
However, the US Federal Reserve’s stance on future rate cuts remains a key factor influencing the AUDUSD pair. Chair Jerome Powell’s testimony before Congress will be closely scrutinized for clues about the Fed’s monetary policy path. A dovish tilt suggesting potential for earlier rate cuts could further strengthen the AUD, while hawkish comments emphasizing the need for further tightening could see the AUDUSD pair retrace its gains.
Technical Analysis
Currently trading at 0.65247, the AUDUSD pair finds itself hovering around key Simple Moving Averages (SMAs). The price action oscillates around the 50-SMA (blue line) and 100-SMA (orange line) but comfortably above the 20-SMA (green line). Notably, the 20-SMA recently crossed below both the 50-SMA and 100-SMA, potentially indicating a shift in momentum.
The upward-sloping Relative Strength Index (RSI) sits at 55.70, indicating neither overbought nor oversold territory. A sustained push above the current price level could offer short-term trading opportunities towards the 0.65577 resistance level. A break above this level could potentially see further bullish momentum towards 0.65969 and 0.66245. However, short-term trading opportunities could arise towards the initial support at 0.66037 and 0.64770 next, should the price action fail to sustain a push above the key SMAs.
Summary
The AUDUSD pair is caught in a tug-of-war between fundamental and technical forces. Positive developments in China and a weaker USD are providing support, while the below-forecast Australian GDP and cautiousness ahead of Fed Chair Powell’s testimony are limiting gains. A sustained push above the key SMAs could present short-term trading opportunities towards the 0.65577 resistance level. However, a failure to hold above these levels could lead to a decline towards the initial support at 0.64770.
Sources: TradingView, Trading Economics, MT Newswire, Reuters, Australian Bureau of Statistics.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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