Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6168.
- Add a stop-loss at 0.6350.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6360 and a take-profit at 0.6450.
- Add a stop-loss at 0.6250.
The AUD/USD price tilted upwards during the American and Asian sessions as the strong US dollar comeback took a breather. It has risen in the past two straight days and was trading at 0.6292, which was the highest point since Thursday.
China Party Congress
Australia and China have a close trade relationship. China buys most of Australia’s goods and services. Therefore, the Australian dollar tends to react to business activity in China, which is one reason why it has slumped this year.
The pair reacted mildly to the latest China Party Congress in Beijing that brings together 2,400 party members. In his speech, Xi Jinping said that the country will strive yo reunify with Taiwan in a peaceful manner. He, nonetheless, warned that the country will be forced to use military force to ensure this reunification.
At the same time, he praised the Covid-zero approach that has contributed to this year’s economic slowdown. He believes that the measures are necessary to save lives. In addition, he said that the government will continue with reforms in the technology and real estate sectors.
The AUD/USD price also reacted to the ongoing floods in Victoria. These floods are expected to lead to more challenges as the country emerges from the pandemic. For one, it will likely lead to more supply chain bottlenecks and higher cost of goods such as fresh fruit, vegetables, grain, and milk
In addition, measures to offer relief will likely be inflationary. In a statement, the prime minister said that the worst-hit people will be eligible for government payments.
Meanwhile, the RBA published minutes of the last meeting. These minutes showed that the bank was starting to get cautious about super-sized rate hikes. In its meeting, the RBA hiked rates by 0.25%, which was lower than the median estimate of 0.50%.
AUD/USD forecast
The AUD/USD pair moved upwards slightly as the US dollar strength eased. It rose to a high of 0.6315, which was higher than last week’s low of 0.6173. The pair remains slightly below the important resistance level at 0.6364, which was the lowest level on September 28.
It is also below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved up slightly. The pair will likely remain in a bearish trend until it moves above the moving averages and the resistance at 0.6365.
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