Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6355.
- Add a stop-loss at 0.6465.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6445 and a take-profit at 0.6517.
- Add a stop-loss at 0.6365.
The AUD/USD exchange rate has been more resilient than other peers like the GBP/USD and EUR/USD pairs. The rate remained slightly above the key support at 0.6400. This price is a few points below this month’s high of 0.651.
Strong US dollar environment
A key theme in the forex market has been characterized by a strong US dollar. The dollar index (DXY), which measures the greenback against a basket of currencies per year, has risen to $105.66. It has risen to the highest level in more than 6 months.
The dollar strength continued after last week’s Federal Reserve interest rate decision. In it, the bank decided to leave interest rates unchanged between 5.25% and 5.50%. It also hinted that it will deliver another 0.25% hike in the next meetings.
As a result, US bond yields are sitting at their highest levels in years. The 2-year yield has soared to over 5% while the 10-year and 30-year have jumped to 4.58% and 4.66%, respectively.
Some analysts believe that the bond sell-off will likely continue for a while. In a statement, Bill Ackman, a leading player in Wall Street, warned that the 30-year yield could jump to 5.5% later this year.
He believes that the economy faces major inflation challenges. For example, union workers in the US are still striking, meaning that wages could continue rising. Also, the long-term deflationary effects of outsourcing from China are fading.
There is also the inflationary challenge of the traffic jam at the Panama Canal. Therefore, the Fed could deliver at least one or more hikes later this year. It will also leave rates higher for longer.
The AUD/USD pair will be driven by the latest US consumer confidence and house price index data.
AUD/USD technical analysis
The Australian dollar has been under pressure in the past few days. Along the way, it has moved slightly below the 50-period moving average. It has remained below the important resistance point at 0.6517, the highest point on September 20th and 1st. The Relative Strength Index (RSI) has dropped below the neutral point.
Therefore, the outlook for the AUD/USD pair is bearish, with the target level being at 0.6354, the lowest point this month.
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