Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6520.
- Add a stop-loss at 0.6620.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6575 and a take-profit at 0.6650.
- Add a stop-loss at 0.6530.
The AUD/USD price remained in a consolidation phase on Tuesday morning ahead of key events in the financial market. The Australian dollar was trading at $0.6570 against the greenback, where it has been stuck at in the past few days. This price is a few points below last month’s high of 0.6690.
US inflation data ahead
This will be a crucial week for the US dollar and other financial assets as the US publishes important economic data. The US will publish its November inflation data on Tuesday, which will set the tone for the broader market.
Inflation, together with the jobs numbers, are important part in the Fed’s dual-mandate. Economists believe that these numbers will reveal that the US inflation dropped again in November.
Precisely, the consensus is that the headline CPI dropped from 3.2% in October to 3.1% in November. Core inflation, which excludes the volatile food and energy prices, is expected to remain unchanged at 4.0%.
A higher inflation figure will reinforce the Fed’s hawkish tone when it concludes its two-day meeting on Wednesday. On the other hand, a weaker inflation report will raise the possibility of the Fed sounding dovish in its meeting.
Most economists see the Fed leaving rates unchanged between 5.25% and 5.50%. With risky assets like cryptocurrencies and stocks rising, the Fed will likely push back against the idea of easing.
The Fed’s decision will come a week after the Reserve Bank of Australia (RBA) decided to leave its rates unchanged last week. In its statement, the bank pointed to holding rates steady until at least February as it observes inflation trends.
There will be no economic numbers from Australia on Tuesday. The only ones to watch out will be the latest Australian jobs numbers scheduled for Thursday.
AUD/USD technical analysis
The AUD/USD exchange rate has pulled back sharply in the past few days. This retreat started after the pair formed a double-top pattern whose neckline was at 0.6570, the lowest point on November 30th. It has dropped below the 25-period and 50-period moving averages and the 23.6% Fibonacci Retracement level.
The Average Directional Index (ADX) has slipped to its lowest point since November 1st, signaling that the bearish momentum has eased. Therefore, the pair will likely resume the downtrend, with the next support point to watch being at 0.6520.
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