Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6650.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6600 and a take-profit at 0.6700.
- Add a stop-loss at 0.6500.
The AUD/USD exchange rate continued soaring as the US dollar index (DXY) retreated to the lowest point since August. The pair jumped to a high of 0.6585, its lowest point since August 10th. It has risen by over 4.95% from its October lows.
Hawkish Bullock and weak USD
The Australian dollar has been in a strong uptrend in the past few days as Michele Bullock, the head of the Reserve Bank of Australia (RBA) has turned extremely hawkish. She surprised the market in November by hiking rates by 0.25% to a 12-year high of 4.35% in a bid to fight inflation.
Bullock has maintained a hawkish tone and insisted that she could hike rates again if inflation remains this year. The most recent data showed that the headline CPI rose to 5.4% in the third-quarter, much higher than the RBA’s target of 2.0%.
Therefore, analysts expect that the RBA will maintain interest rates at the current level in December as it waits for the next inflation data.
The AUD/USD pair has also jumped as the US dollar index has plunged to a low of $103.41. It has dropped by over 3.67% from the highest point in October 3rd. The dollar has fallen sharply as traders suspect that the Fed has finished its rate hikes.
Unlike the RBA, the Fed decided to leave interest rates unchanged between 5.25% and 5.50%. It also hinted that it will maintain rates unchanged as financial conditions deteriorate.
The AUD/USD pair will likely be muted on Monday as American traders return from the long Thanksgiving weekend. The only data to watch will be the upcoming US new home sales data followed by consumer confidence on Tuesday.
AUD/USD technical analysis
The Australian dollar has been in a strong bullish trend in the past few days. It has already flipped the important resistance point at 0.6521, the highest point on September 1. Most importantly, it did a break and retest pattern, which is a sign of continuation.
The pair has also moved above the 50-period Arnaud Legoux Moving Average (ALMA) and is stuck at the 50% Fibonacci Reteacement point. It has also risen above the first resistance point of the Andrews Pitchfork tool.
The pair has formed a small double-top pattern at 0.6590. In price action analysis, this pattern is one of the most bearish signs. Therefore, it will likely retreat and retest the psychological level at 0.6500.
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