Audusd rises amid mixed economic signals and inflationary pressures

AUDUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	0.18%	11.5 Pips
Week to-date	-2.04%	-129.6 Pips
December	-4.14%	-269.1 Pips

Upcoming key events (London Time)

Fri 01:30 PM USD PCE Price Index, excluding food and energy (12-mth)

What happened lately

The United States’ economic data showcases mixed performance in December. The Manufacturing Business Outlook Survey, sourced from the Philadelphia Fed, saw a downturn to -16.4 points in December from -5.5 points in November, indicating a contraction in manufacturing activities. However, there’s positive news from the Bureau of Economic Analysis, with the GDP annual growth rate increasing to 3.1% in Q3 from 2.8% in Q2, suggesting an overall better economic performance over the quarter. The PCE, excluding food and energy prices, ticked up slightly to 2.2% in Q3 from 2.1% in Q2, while the GDP Price Index held steady at 1.9%. Meanwhile, the U.S. Initial Unemployment Insurance Claims dropped to 220K in mid-December, reflecting a strengthening labor market correction. The Federal Reserve’s decision to lower the interest rate to 4.5% from a previous 4.75% suggests a more cautious approach moving forward, with projections indicating a longer-term interest rate rise to 3%.

In Australia, inflationary expectations have risen. In December, reported values indicate consumer inflationary expectations increased to 4.2% from 3.8% in November. This shift suggests rising anxiety about future inflationary pressures, which could potentially influence monetary policies if this trend persists.

The data highlights an interesting dynamic for the AUDUSD currency pair. The mixed U.S. data, with improved GDP growth but weakening manufacturing outlook and a reduction in the Federal Reserve’s interest rate, presents a scenario of uncertain outcomes for the US dollar in the short term. Meanwhile, rising inflationary expectations in Australia indicate potential monetary tightening, which would typically support the Australian dollar. This environment of increased future inflation expectations coupled with Australia’s relative economic performance could lend strength to the Australian dollar. As such, the AUD may appreciate against the USD, which could be one reason for the observed 0.18% rise to 0.62375. However, these changes are nuanced, as market movements will also heavily depend on investor sentiment and upcoming economic data releases, particularly the U.S. PCE Price Index due soon.

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What can we expect from AUDUSD today?

AUDUSD on Thursday rose 0.18% to 0.62375. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for AUDUSD looks bullish as the pair ended higher after Thursday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 0.6269 with break above could target R2 at 0.63006 or figure level area. While towards the downside, we are looking at daily low of 0.61985 as an important support. Break below this level could weaken the current bullish momentum. A break above 0.62653 may suggest continuation after recent positive movement.

For the week to-date, take note that AUDUSD is bearish as the pair posted lower by -2.04%.

Key levels to watch out:

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