Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6285.
- Add a stop-loss at 0.6400.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6350 and a take-profit at 0.6400.
- Add a stop-loss at 0.6290.
The AUD/USD exchange rate continued its comeback on Tuesday as the US dollar index (DXY) retreated and after the Reserve Bank of Australia (RBA) published its minutes. The pair rose to a high of 0.6350, higher than last week’s low of 0.6286.
Risk-off sentiment continues
The Australian dollar rose against the US dollar as investors embraced a risk-on sentiment in the overnight session. This view was confirmed by the soaring American stocks as the Nasdaq 100, Dow Jones, and S&P 500 indices rose by over 1%.
The US dollar index (DXY) dropped by 0.25%. In most periods, the dollar tends to fall when fear among investors and traders eases. Notably, the dollar retreated even as the bond sell-off intensified, pushing the 30-year and 10-year bond yields to 4.8% and 4.71%, respectively.
The main catalyst for the AUD/USD pair was the latest minutes by the Reserve Bank of Australia. These minutes provided more color about the bank’s meeting earlier this month. In it, the committee decided to leave interest rates unchanged at 4.10%.
The minutes showed that the committee was still concerned about the country’s inflation, which it believes is too high. The pause, however, was needed to give the committee more picture about the state of the economy.
In a report last week, the IMF warned that the Australian economic growth will remain under pressure as China’s slowdown intensifies. Companies like Evergrande and Country Garden are collapsing because of their $500 billion liabilities. The IMF expects Australia’s economy to grow by 1.2% in 2024, down from 1.7%.
The next key data to that will move the AUD/USD pair will be the upcoming US retail sales numbers. Economists expect the data to show that sales rose by 0.3% in September while core sales jumped by 0.2%.
AUD/USD technical analysis
The AUD/USD exchange rate continued the recovery it started on Friday when it slipped to a low of 0.6286. As it rose, the pair flipped the crucial resistance level at 0.6331 (September 27th low) into support. It has moved slightly below the 50-period and 25-period moving averages while the Relative Strength Index (RSI) was pointing upwards.
Therefore, the pair will likely resume the bearish trend in the near term. If this happens, the pair will likely drop and retest the key support level at 0.6286.
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