The AUD/USD pair has experienced consecutive declines for the second consecutive day during Tuesday’s Asian session, marking a 0.02% decrease following Monday’s 0.39% slump. The cumulative weekly loss now stands at 0.41%. As of the latest update, the pair is transacting at 0.6568, retracting from its weekly high of 0.6570.
The downtrend in AUD/USD is attributed to a combination of bearish technical chart patterns and unfavorable economic data emanating from Australia. Notably, U.S. equities initiated the week on a positive note, reaching record highs amid a limited economic calendar in the United States. However, the Conference Board’s revelation of a slight improvement in the Leading Economic Index for December did little to dispel concerns about underlying weaknesses in the U.S. economy. Justyna Zabinska-La Monica, CB’s senior manager of Business Cycle Indicators, highlighted the persistence of such weaknesses despite some positive contributions from six out of ten leading indicators in December.
In contrast, the U.S. Dollar Index (DXY), a gauge of the dollar against six major currencies, has advanced by 0.09%, reaching 103.32. This development poses a headwind for the AUD/USD pair, which is further compounded by the emergence of a bearish technical chart pattern suggesting potential further downside.
Market participants are now awaiting additional U.S. economic data releases to confirm the trajectory of a soft landing and sustain the ongoing rally in risk assets. The U.S. Commerce Department is scheduled to unveil the Gross Domestic Product (GDP) for Q4 2023, with estimates hovering around 2%, down from the previous quarter’s 4.9%. Subsequent releases include U.S. unemployment claims and the Core Personal Consumption Expenditure (PCE) price index, both expected to increase by 0.2% MoM and 2.6% YoY, respectively.
On the Australian front, attention is turned towards the upcoming release of the NAB Business Confidence, with analysts from ANZ anticipating potential softening in December. A continuation of this trend could further contribute to the economic slowdown, impacting the heightened inflation levels observed at 4.3% in the latest report.
From a technical standpoint, the AUD/USD pair, having formed a ‘bearish-engulfing’ candle chart pattern, may experience additional downward pressure. To validate this outlook, sellers would need to breach the 100-day moving average (DMA) at 0.6516, potentially targeting the 0.6500 level. Further downside support is identified at the November 17 low of 0.6452, preceding a critical support level at 0.6338, corresponding to last year’s November 10 swing low. Conversely, a bullish scenario would materialize if buyers manage to propel prices above the 200-DMA at 0.6578, paving the way for a challenge of the 0.6600 level.
