The AUD/USD pair continues to face downward pressure as weak Chinese export data casts a shadow on the Australian economy due to the close trade ties between the two nations. However, the pair has managed to recover slightly as rate-cut expectations in the US gain momentum. In this article, we’ll break down the technical outlook using multiple timeframes and discuss key economic drivers affecting the AUD/USD pair.
Key Takeaways:
- China Trade Data Impact: Weak trade data from China has weighed on the Australian Dollar.
- Recovery Boost: Comments from Fed’s Kashkari on potential rate cuts have helped AUD/USD recover from its recent low.
- Support and Resistance: The pair faces key support at 0.6700, with resistance around 0.6820.
Technical Analysis:
H1 Chart Analysis:
- Trend: The AUD/USD has been in a short-term downtrend, with a Break of Structure (BOS) seen at 0.6820, confirming bearish momentum. The pair recently rebounded from a low of 0.6700, supported by a demand zone.
- Support and Resistance: Immediate resistance lies near the 0.6740-0.6760 region. If AUD/USD can break above this area, the next target would be 0.6820, a previous high. The pair’s immediate support remains at 0.6700.
- Indicators: The RSI on the hourly chart shows slight oversold conditions, suggesting a potential for near-term recovery.
H4 Chart Analysis:
- Trend: On the H4 chart, the broader structure remains bearish, with the AUD/USD forming a series of lower highs and lower lows. A significant BOS was recorded below 0.6780, leading to the current trading zone.
- Key Levels: The 0.6700-0.6720 range remains a strong support zone. If this level holds, the pair may recover toward 0.6800. However, a failure to hold this support could see the pair drop to the 0.6600 region.
- Indicators: The Moving Average Convergence Divergence (MACD) shows continued bearish momentum, while the RSI is approaching neutral territory.
Daily Chart Analysis:
- Trend: The daily chart illustrates a broader downtrend, with the pair struggling to break past significant resistance zones around 0.6950. The Break of Structure (BOS) at 0.6800 has shifted market sentiment toward bearishness.
- Support and Resistance: The key support level on the daily chart is 0.6700, while resistance remains at 0.6820. A break below the support could see further downside toward 0.6600.
- Indicators: The daily RSI is approaching oversold levels, which may provide some relief for the bulls if buying interest emerges.
Economic Data:
The Australian Dollar has faced significant headwinds from China, its largest trading partner, following weak export data. China’s exports for September saw a sharp decline from 8.4% YoY to just 2.4%, well below the expected 6%. This has added to the overall pessimism surrounding China’s economic outlook, which directly affects the AUD due to their strong trade ties.
Meanwhile, US Federal Reserve rate cut speculation has given the AUD/USD pair some relief. Comments from Fed’s Neel Kashkari on modest rate reductions have diminished the strength of the US Dollar, offering short-term support to the AUD. However, geopolitical risks and further Fed guidance will likely dictate future movements.
Trading Recommendations:
- Day Traders: Consider entering short positions if the pair fails to break above the 0.6740 resistance, targeting the 0.6700 support level. Stop losses should be placed above 0.6760.
- Swing Traders: Monitor the 0.6700 support zone closely. A sustained break below this level could see the pair move toward 0.6600. Conversely, a recovery above 0.6760 could open the door for a rally toward 0.6820.
Conclusion:
The AUD/USD pair remains under pressure due to weak Chinese trade data and global economic uncertainties. However, the possibility of US interest rate cuts is providing some relief. Traders should closely monitor key support and resistance levels, as well as upcoming economic data, to position themselves accordingly.
