Bears take a breather ahead of key PCE data

  • The AUD/USD trades at 0.6580, securing mild gains above the 200-day SMA.
  • Signs of selling momentum are still visible on the daily charts.
  • Despite bearish trends reflected last week, overall bulls lead as pair trades above the 100 and 200-day SMAs.

In Thursday’s session, the AUD/USD was seen trading at 0.6580 with mild gains, rebounding slightly after last week’s 1.20% loss. A neutral to bullish daily outlook is observed, with bears currently taking a breather. This, combined with a brighter outlook on the four-hour chart, suggests the pair might experience more bullish traction in the short term.

On the fundamental side, the AUD/USD has recently been pushed down by the strong US economic performance which makes markets think that the Federal Reserve (Fed) won’t rush to validate the market’s easing expectations with a rate cut. On the other hand, Australia confirmed plans to scale back tax relief for the wealthy, effectively lifting pressure on the Reserve Bank of Australia (RBA) to continue restrictive monetary policy. Market expectations predict the RBA’s first rate cut in September while markets pushed the start of the easing cycle of the Fed to May from March.

On Friday, the US will release December’s Personal Consumption Expenditures (PCE) figures which may likely set the tone of the pair for the short term.

AUD/USD levels to watch

From the daily chart indicators, the trading scene appears to be heavily influenced by the bears. Despite this, the bulls maintain their presence, preventing any significant downturn. The negative slope and the unfavorable positioning of the Relative Strength Index (RSI) within the negative area send off bearish signals. Meanwhile, the flat red bars of the Moving Average Convergence Divergence (MACD) further suggest a continued selling momentum. Yet the underlying strength of the pair becomes apparent as it comfortably aligns above the 100 and 200-day Simple Moving Averages (SMAs), even though it sits below the 20-day SMA. After the previous week’s 1.20% drop, the current bearish action feels perhaps more like a pause in the action rather than a complete shift in sentiment.

Turning towards the shorter-term outlook, the prospects appear more promising on the four-hour chart. With the four-hour Relative Strength Index (RSI) indicating a positive slope in the negative territory, it suggests a mounting buying pressure that may soon translate into a bullish momentum. The flat red bars of the four-hour Moving Average Convergence Divergence (MACD) remain, suggesting a mostly flat short-term trend. However, their decline in intensity points towards a potential ease off selling pressure.

AUD/USD daily chart