Mixed economic indicators influence AUDUSD trading dynamics, resulting in a slight drop

AUDUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.11%	-7.3 Pips
Week to-date	-0.21%	-13.1 Pips
February	2.06%	128.2 Pips

Upcoming key events (London Time)

Thu 12:30 AM AUD Labour Force Monthly Employment Change
Thu 10:30 PM AUD RBA Governor Michele Bullock speech

What happened lately

In the United States, the economic indicators present a mixed picture for the housing sector. The U.S. Building Permits saw a marginal increase, rising to 1.483 million in January from 1.482 million in December. This suggests a slight optimism in the future construction outlook. Meanwhile, U.S. Housing Starts experienced a decline, falling to 1.366 million from the revised December figure of 1.515 million, indicating a tangible slowdown in the construction start-ups. Nonetheless, a positive note comes from the New York Empire State Manufacturing Index, which showed a significant improvement, climbing to 5.7 points in February from January’s -12.6 points, reflecting a rebound in manufacturing activities within the region.

Australia’s economic updates reveal a deceleration in wage growth and a monetary policy adjustment. The Wage Price Index for the fourth quarter decreased slightly to 0.7%, down from 0.8% in the third quarter, signaling a smaller increase in wage growth which could imply restrained consumer spending capacity. Moreover, the Reserve Bank of Australia (RBA) decided to lower the Cash Rate Target to 4.1%, down from the previous 4.35%. This monetary easing approach is likely an attempt to stimulate the Australian economy by making borrowing more affordable, fostering economic activity.

The recent economic reports and decisions are likely to impact the AUDUSD trading dynamics. The decline in housing starts in the U.S. contrasts with improving manufacturing sentiment, creating a mixed perspective on U.S. economic performance. On the Australian front, the drop in the Cash Rate Target by the RBA, alongside lower wage growth, points to an economic stimulus initiative. This combination of factors tends to exert downward pressure on the Australian dollar relative to the U.S. dollar, as evidenced by the recent 0.11% drop in AUDUSD to 0.63434. Any upcoming events, such as the Australian Labour Force Monthly Employment Change and the RBA Governor Michele Bullock’s speech, could further influence the currency pair, depending on the new insights they provide into the economic outlook.

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What can we expect from AUDUSD today?

AUDUSD on Wednesday dropped -0.11% to 0.63434. Price is above 9-Day EMA while Stochastic is falling.

Updated daily direction for AUDUSD looks bearish as the pair posted lower in Wednesday trading session.

Looking ahead for the day, immediate support level is at S1 0.63297 with break below could see further selling pressure towards S2 at 0.63161. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.63700 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.63362 would indicate selling pressure.

For the week to-date, take note that AUDUSD is mixed as compared to the prior week.

Key levels to watch out:

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