Bullish view
Bearish view
- Set a sell-stop at 0.6565 and a take-profit at 0.6600.
- Add a stop-loss at 0.6775.
The Aussie continued its strong recovery, helped by the diverging monetary policy statement between the Federal Reserve and Reserve Bank of Australia (RBA). The AUD/USD pair rallied to a high of 0.6612, the highest point since August.
Fed and RBA divergence
The Fed and RBA are showing signs of diverging on their monetary policy. In its decision this month, the Fed left rates unchanged between 5.25% and 5.50%. Minutes published last week showed that most officials were concerned about further rate hikes.
Recent economic data is supportive of Fed pausing its interest rate hikes. The labor market has softened while inflation has moved downwards recently. The headline Consumer Price Index (CPI) retreated to 3.2% in October while core inflation fell to 4.0%.
There are signs that inflation continued dropping in November now that the average gasoline price in the US has dropped to $3.2. Brent and WTI have dropped from over $90 per barrel to less than $80.
The RBA, on the other hand, has sounded relatively hawkish. In its meeting, the bank decided to hike interest rates by 0.25%. And in recent statement, Michele Bullock, the head of the bank, left the door open for another hike.
Economists expect that the bank will leave rates unchanged in its next week’s meeting. It will then hike rates in the first quarter of 2024 if the quarterly inflation remains much higher than the target of 2.0%.
The AUD/USD pair has also jumped because of the ongoing interventions by China, the second-biggest economy in the world. Chinese officials have unveiled measures that will save the real estate sector, which has come under intense pressure in the past few months.
The goal of the stimulus is to ensure that unfinished apartments are complete. This explains why important metals like iron ore and copper have jumped recently.
AUD/USD technical analysis
The Australian dollar continued its bullish momentum amid divergence between the RBA and Fed. It jumped to a high of 0.6613, the highest point since August. It has remained above the 50-period and 25-period moving averages.
The pair has just flipped the 50% Fibonacci Retracement level into a support level. Also, the MACD has remained above the neutral point while the Relative Strength Index (RSI) has pointed upwards.
Therefore, the pair will likely continue soaring as buyers target the key resistance point at 0.6700.
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