AUDCHF Outlook (12th March)

Technical Analysis

After three consecutive daily declines, the Australian Dollar (AUD) traded around 0.6280-0.6270. Despite a broad sell-off in the US Dollar (USD), AUD/USD struggled to gain traction. The US Dollar Index (DXY) slipped to 103.30, its lowest since early October, but the Aussie remained under pressure.

Fundamental Factors Affecting AUD

Trade tensions weigh on market sentiment, with the US considering a 25% tariff on Canadian and Mexican goods and a 20% duty on Chinese imports. This raises the risk of retaliatory measures and could weaken demand for Australian exports. Given China's importance as Australia's top trade partner, any slowdown in Chinese demand could negatively impact the Aussie. However, a rebound in copper and iron ore prices provided short-term relief.

Central Banks and Rate Outlook

The Federal Reserve (Fed) faces a balancing act between keeping rates high to combat inflation and the rising risk of a US economic slowdown. Meanwhile, the Reserve Bank of Australia (RBA) cut rates by 25 basis points in February but signaled this may not mark the start of a prolonged easing cycle. Governor Michele Bullock emphasized that future decisions will depend on inflation data, while Deputy Governor Andrew Hauser downplayed expectations of multiple cuts. Markets, however, anticipate up to 75 basis points of further easing over the next year.

Key Takeaway for Traders

AUD remains pressured by trade tensions and global uncertainty. While Australia's inflation remains subdued at 2.5%, the RBA's cautious approach suggests rate cuts may be limited. Traders should watch for further developments in US-China trade relations and US economic data to gauge the next moves.

AUDCHF – D1 Timeframe

The daily timeframe chart of AUDCHF shows the price retracing after breaking below the previous low. A rally-base-drop supply zone around the key levels of the Fibonacci retracement tool leaves ample room for the sellers to intervene with an outright bearish outcome.

AUDCHF – H4 Timeframe

The lower timeframe chart of AUDCHF gives further details into the daily timeframe outlook, with the drop-base-drop supply zone fitting snugly within the daily timeframe supply zone and on top of the 76% Fibonacci retracement level.

Analyst's Expectations: 

Direction: Bearish

Target- 0.54919

Invalidation- 0.56566

CONCLUSION

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