Daily Analysis on AUDUSD: Tuesday 07 August 2024
"The decline recently tested the AUDUSD trendline. Is there a chance for a rise?"
An overview of the Australian dollar's performance
The Australian dollar (AUD) has consistently traded below $0.65 and is currently nearing a three-month low. Numerous things, such as the status of the global economy and anticipations for domestic monetary policy, could be to blame for this decline.
Factors Affecting the AUD's Performance
U.S. economic data, particularly job reports
In July, there were just 114,000 new hires in the U.S., much lower than the 175,000 expected. Owing to this subpar performance, investors are growing increasingly apprehensive about a possible U.S. recession and have sold off riskier assets like the Australian dollar.
Market volatility has increased, and a move toward safer assets has occurred as a result of fears of a U.S. recession. This kind of thinking has severely damaged riskier currencies like the AUD, keeping it near its recent lows.
The Federal Reserve's interest rate policies
According to the depressing jobs report, market participants anticipate a swift reduction in interest rates from the U.S. Federal Reserve to support the flagging economy.
The markets believe that in September, there will be a 50 basis point decrease in U.S. interest rates. This anticipated decline is positive news for the Australian dollar (AUD) since lower U.S. interest rates have the potential to draw in more investors.
These projections should keep the AUD stable in the near future. If the Fed cuts rates as expected, risk assets like the Australian dollar may benefit from a global economic rebound.
The Australian Reserve Bank's (RBA) monetary choices
Investors are awaiting the latest pronouncement on monetary policy from the RBA at the local level. The market widely anticipates that the RBA will maintain interest rates at 4.35% for the sixth consecutive time.
Market participants will need to rely on the RBA's forward guidance. Traders will search for hints on future rate cuts or adjustments to the economic outlook.
The market's reaction to the RBA's decision and forward guidance will have a significant impact on the AUD. Trading professionals may better position themselves by using forward-looking signals regarding policy changes.
Australia's core inflation rate
Australia's core inflation rate dropped more than anticipated in the second quarter, with quarterly and annual rates coming in at 0.8% and 3.9%, respectively, according to the latest data.
Released on 19 June 2024 (data as at 13 June)
This reduction in inflation has caused a shift in market attitudes. It is now 75% likely that the RBA will cut rates in November, much sooner than the original estimate of April of the following year.
This change reflects a reassessment of the economy's health, with traders now expecting early monetary easing to support it.
In conclusion, fears about the state of the world economy and expectations for domestic policies now affect the Australian dollar's value. Weak U.S. employment growth, anticipated Federal Reserve rate cuts, and domestic inflation data are all crucial concerns.
If the Federal Reserve cuts interest rates and the RBA releases a clear direction for the future, the AUD may find support and rise. Nonetheless, domestic inflation trends and enduring worries about the state of the world economy will continue to impact inflation's trajectory.
Despite an obscure economic outlook, the Australian dollar has retested its trendline, and favorable factors could aid in its comeback.
Technical Analysis
AUDUSD: Daily Timeframe
On the daily timeframe of AUDUSD, we observe a significant price rejection with high volume, which can indicate the strength of the trendline.
AUDUSD: 4-Hours Timeframe
On the 4-hour timeframe price chart, we have identified a short-term downtrend. We should wait for a clear breakout and retest before executing a trade around 0.65200, with the stop loss set at 0.64800, and the expected take profit point set at 0.66300, which aligns with a previous key support level.
An overview of the Australian dollar's performance
The Australian dollar (AUD) has consistently traded below $0.65 and is currently nearing a three-month low. Numerous things, such as the status of the global economy and anticipations for domestic monetary policy, could be to blame for this decline.
Factors Affecting the AUD's Performance
U.S. economic data, particularly job reports
In July, there were just 114,000 new hires in the U.S., much lower than the 175,000 expected. Owing to this subpar performance, investors are growing increasingly apprehensive about a possible U.S. recession and have sold off riskier assets like the Australian dollar.
Market volatility has increased, and a move toward safer assets has occurred as a result of fears of a U.S. recession. This kind of thinking has severely damaged riskier currencies like the AUD, keeping it near its recent lows.
The Federal Reserve's interest rate policies
According to the depressing jobs report, market participants anticipate a swift reduction in interest rates from the U.S. Federal Reserve to support the flagging economy.
The markets believe that in September, there will be a 50 basis point decrease in U.S. interest rates. This anticipated decline is positive news for the Australian dollar (AUD) since lower U.S. interest rates have the potential to draw in more investors.
These projections should keep the AUD stable in the near future. If the Fed cuts rates as expected, risk assets like the Australian dollar may benefit from a global economic rebound.
The Australian Reserve Bank's (RBA) monetary choices
Investors are awaiting the latest pronouncement on monetary policy from the RBA at the local level. The market widely anticipates that the RBA will maintain interest rates at 4.35% for the sixth consecutive time.
Market participants will need to rely on the RBA's forward guidance. Traders will search for hints on future rate cuts or adjustments to the economic outlook.
The market's reaction to the RBA's decision and forward guidance will have a significant impact on the AUD. Trading professionals may better position themselves by using forward-looking signals regarding policy changes.
Australia's core inflation rate
Australia's core inflation rate dropped more than anticipated in the second quarter, with quarterly and annual rates coming in at 0.8% and 3.9%, respectively, according to the latest data.
Released on 19 June 2024 (data as at 13 June)
This reduction in inflation has caused a shift in market attitudes. It is now 75% likely that the RBA will cut rates in November, much sooner than the original estimate of April of the following year.
This change reflects a reassessment of the economy's health, with traders now expecting early monetary easing to support it.
In conclusion, fears about the state of the world economy and expectations for domestic policies now affect the Australian dollar's value. Weak U.S. employment growth, anticipated Federal Reserve rate cuts, and domestic inflation data are all crucial concerns.
If the Federal Reserve cuts interest rates and the RBA releases a clear direction for the future, the AUD may find support and rise. Nonetheless, domestic inflation trends and enduring worries about the state of the world economy will continue to impact inflation's trajectory.
Despite an obscure economic outlook, the Australian dollar has retested its trendline, and favorable factors could aid in its comeback.
Technical Analysis
AUDUSD: Daily Timeframe
On the daily timeframe of AUDUSD, we observe a significant price rejection with high volume, which can indicate the strength of the trendline.
AUDUSD: 4-Hours Timeframe
On the 4-hour timeframe price chart, we have identified a short-term downtrend. We should wait for a clear breakout and retest before executing a trade around 0.65200, with the stop loss set at 0.64800, and the expected take profit point set at 0.66300, which aligns with a previous key support level.
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