Technical Analysis: AUD/USD
Hi all traders and speculators. Today, I’m sharing my technical analysis of the AUD/USD currency pair. Currently, the AUD/USD pair is trading at 0.6528. The dollar is exhibiting a bearish trend, largely due to the downward movement of the dollar index, which has caused the AUD/USD pair to move lower. The recent price action indicates that sellers are putting pressure on the market, pushing prices down.
The Relative Strength Index (RSI) is currently below 50, reflecting a bearish sentiment. Meanwhile, the Moving Average Convergence Divergence (MACD) is trading below its midline, indicating bearish strength. Both the 20-period and 50-period exponential moving averages (EMAs) are pointing downward, which supports the view that AUD/USD might decline further in the coming days.
Chart Analysis:
On the weekly chart, the teal lines highlight major support levels where buyers are active, while the olive lines represent significant resistance levels where sellers are dominant. The key resistance level is at 0.6890. If the price manages to break above this level and sustain above it, there could be potential for new targets, such as 0.7411 and even 0.8004, which is a third-level resistance. Conversely, a critical support level is at 0.6185. If the price breaks below this level and holds, it might open the way to new targets like 0.5520 and 0.4832, which are third-level support zones. It's crucial to use a stop loss around these levels to protect your position.
Indicators Used:
- MACD Indicator: Helps identify changes in the strength, direction, momentum, and duration of a trend.
- RSI (Relative Strength Index) Period 14: Measures the speed and change of price movements, indicating whether a currency pair is overbought or oversold.
- 50-Day Exponential Moving Average (Color Orange): Provides a smoothed average of the price over 50 days, highlighting medium-term trends.
- 20-Day Exponential Moving Average (Color Magenta): Offers a shorter-term perspective, showing more immediate trends.
Market Context:
The recent decline in the AUD/USD pair follows the release of trade balance data on Thursday, which showed a trade surplus in June that exceeded expectations but was still lower than the previous month’s figure. This, combined with the anticipated pause in interest rate hikes by the Reserve Bank of Australia (RBA), has put downward pressure on the AUD. Market sentiment has shifted towards the possibility of an RBA rate cut in November, which is a significant departure from the previous expectation of rate cuts in the following year. This shift reflects concerns about the potential negative impact of further rate hikes on Australia’s economic recovery.
Additionally, a weaker-than-expected Caixin Manufacturing PMI in China, Australia’s major trading partner, has further pressured the AUD. As China's economy significantly influences Australia's economic health, any slowdown in China’s economy can negatively impact Australia. Despite these challenges, the decline in the AUD against the USD may be limited, as the US dollar is also facing its own set of challenges following the Federal Reserve's decision to maintain interest rates.
Technical Outlook:
From a technical standpoint, the AUD/USD pair is consolidating within a declining channel, suggesting a potential bearish bias. The immediate support is at the lower boundary of the channel, around 0.6500. If this level is breached, the price might further decline to 0.6470. On the upside, resistance is found at the upper boundary of the channel at 0.6555, with additional resistance levels at 0.6575 and the nine-day EMA at 0.6581. A decisive break above these levels could propel the AUD/USD towards its six-month high of 0.6798.
The 14-day RSI indicates a potential upward correction despite the overall downward trend. This suggests that while the current trend is bearish, there could be short-term opportunities for upward movement. Traders should be cautious and look for confirmation of trend reversals or continuation before making trading decisions.
Summary:
In conclusion, the Australian dollar is navigating a complex environment due to both domestic and external factors. The bearish trend in the AUD/USD pair is influenced by the RBA’s anticipated pause on interest rate hikes, weaker economic data from China, and overall market sentiment. Technically, the pair is in a declining channel, with immediate support at 0.6500 and resistance at 0.6555, 0.6575, and the nine-day EMA at 0.6581. Traders should closely monitor these levels and be prepared for potential short-term corrections. The broader trend remains bearish, but careful observation of market indicators and news events will be crucial for optimizing trading strategies.
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