The Australian Dollar (AUD) is currently trading cautiously against the US Dollar (USD) near its two-week lows, weighed down by a broader risk aversion sentiment that has gripped global markets since the new year began. The initial optimism at the end of 2023, fuelled by dovish Fed signals, has evaporated as risk appetite wanes. This shift is attributed to a confluence of factors, including higher US Treasury yields, a retreat in Wall Street stocks, and geopolitical concerns.
The market is firmly expecting the Reserve Bank of Australia (RBA) to adopt a more cautious approach to rate cuts compared to its global peers. This is due to Australia’s less aggressive rate hike cycle and persistent inflation, which RBA Governor Michele Bullock deems “increasingly homegrown and demand-driven.”
On the US Dollar front, the market focus is squarely on the release of the FOMC minutes later today and the US non-farm payrolls report on Friday. These will offer crucial clues about the Fed’s monetary policy path, potentially impacting risk sentiment and AUDUSD direction. A strong jobs number could bolster the USD, while a weaker reading might revive risk appetite and support the AUD.
Technical
The 4-hour chart shows that the USDJPY currently trades at 0.67593, with the price action slightly flat ahead of the FOMC Meeting Minutes release, due later today. Price action trading below the 20-SMA (green line) and 50-SMA (blue line) but above 100-SMA (orange line), indicating a potential for both upside and downside movement in the short term.
The downward-sloping RSI (39.77) and RSI-based MA (46.26) indicate a slight bearish bias, but the flatness of the RSI leaves a potential for a break in either direction firmly in play.
Immediate resistance lies at 0.68140, while initial support rests at 0.67296. A sustained push above the resistance could signal a bullish resurgence, potentially targeting 0.68700. Conversely, a break below support might pave the way for further declines towards 0.66904.
Summary
The AUDUSD faces a tug-of-war between cautious optimism and technical bearishness. While the FOMC minutes and NFP data could provide catalysts, the immediate focus is on maintaining the price above the 0.67296 support. A break above 0.68140 could confirm bullish momentum, likely targeting 0.68700. Conversely, a fall below 0.67296 might trigger further losses towards 0.66904.
Sources:TradingView, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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