Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6530.
- Add a stop-loss at 0.6760.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6720 and a take-profit at 0.6820.
- Add a stop-loss at 0.6650.
The AUD/USD price pulled back slightly on Wednesday morning as the market reacted to the latest RBA minutes. It dropped to 0.6660, the lowest level since November 29. It has dropped by about 3.3% from its highest level this month.
RBA hawkish statement
The AUD/USD declined slightly after the Reserve Bank of Australia (RBA) published minutes of the meeting held earlier this week. In it, the bank decided to hike interest rates by 0.25% for the third straight month. It brought the official cash rate to 3.1%.
The minutes showed that the central bank was committed to bringing inflation lower in 2023. It hinted that it will continue hiking interest rates in the coming months. Minutes also showed that the bank considered pausing rates during the meeting.
The AUD/USD price dropped after the US published mixed housing numbers. Data showed that building permits dropped by 11.2% in December to 1.34 million. Housing starts, on the other hand, dropped by 0.5% to 1.42 million. These numbers mean that the housing market is feeling the heat of the rising interest rates in the US.
Last week, the Federal Reserve voted to deliver a 0.50% rate hike, bringing the year-to-date increases to 450 basis points. In his statement, Jerome Powell warned that the bank will likely continue hiking rates even as inflation showed signs of easing.
The next key data to watch today will be America’s existing home sales and consumer confidence numbers. Economists expect the data to show that consumer confidence rose from 100.2 to 101.0 in December as inflation eased.
Existing home sales are expected to drop from 4.43 million to 4.20 million. While thse numbers are important, their impact on the US dollar will be a bit muted.
AUD/USD forecast
The four-hour chart shows that the AUD/USD pair has been in a bearish trend in the past few days. It dropped below 0.6700 and moved below the 25-day and 50-day moving averages. The pair has moved below the important resistance level at 0.6798, which was the highest level on November 15. It also declined below the ascending trendline shown in blue.
Therefore, the pair will likely continue falling as sellers target the second support of the standard pivot point at 0.6530. The stop-loss of this trade will be at 0.6760.
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