Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6455.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6415 and a take-profit at 0.6500.
- Add a stop-loss at 0.6350.
The Australian dollar continued its sell-off during the US and Australian sessions. The AUD/USD exchange rate dropped to a low of 0.6400 on Thursday morning, the lowest point since November 2nd. It has dropped by more than 1.85% from the highest level this month.
Australian dollar sell-off intensifies
The Australian dollar has been in a steady sell-off in the past few days as traders reflected on the latest Reserve Bank of Australia (RBA) decision. In it, the bank decided to hike interest rates by 0.25% to 4.35%, the highest point in over 11 years.
The bank’s decision differed from what other central banks have done. Banks like the Federal Reserve, European Central Bank (ECB), and the Bank of England (BoE) decided to leave interest rates unchanged.
The RBA also hinted that it will continue hiking interest rates in the coming meetings. However, most analysts believe that it will maintain status quo as inflation continues falling. Besides, the price of crude oil has continued falling in the past few days.
Brent, the global benchmark, dropped to $79.33 while the West Texas Intermediate (WTI) fell to $75.57. Similarly, the price of natural gas continued dropping, which could push inflation lower. Other commodities, which Australia sells, like iron ore and copper continued falling.
The AUD/USD exchange rate dropped as American bond yields continued falling. After peaking in October, the 10-year bond yields dropped to 4.52% while the 30-year crashed to 4.65%. The 5-year yield fell to 4.52%.
There will be no major news event from Australia and the United States. The key data to watch will be the latest initial and continuing jobless claims data. Economists polled by Reuters believe that continuing claims dropped to 215k last week.
AUD/USD technical analysis
The AUD/USD has sold off hard in the past few days. It has plunged from last Friday’s high of 0.6523 to a low of 0.6400. The pair has dropped below the Fibonacci pivot point of 0.6445. It also dropped below the 50-period moving average and the key support at 0.6405. Also, it retested the crucial support at 0.6400, the highest swing on October 26th.
The Stochastic Oscillator moved to the oversold level. Therefore, the outlook for the pair is bearish, with the next support to watch will be at 0.6370.
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