Bullish view
Bearish view
- Set a sell-stop at 0.6690 and a take-profit at 0.6600.
- Add a stop-loss at 0.6780.
The AUD/USD price bull run stalled after Federal Reserve officials warned that it was too early to speculate on rate cuts. After peaking at 0.6728, the pair retreated to the psychological level of 0.6700.
Doubts on Fed rate cuts
The Federal Reserve sounded optimistic that it had prevailed in its battle against inflation. In a statement last week, the bank decided to leave interest rates unchanged between 5.25% and 5.50%.
The Fed’s dot plot pointed to three rate cuts in 2024, a move that was supported by Jerome Powell who failed to push back during his press conference. Therefore, some analysts believe that the bank could start cutting rates in March.
However, a few Fed officials have pushed back against the dovish tone. In a statement on Friday, James Williams of New York Fed warned that it was still early to predict rate cuts since inflation is still stubbornly high.
This view was shared by Austan Goolsbeethe head of Chicago Fed. In an interview on Sunday, he said that the bank’s decisions will be determined by economic data. He said:
“We’ve made a lot of progress in 2023, but I still caution everyone, it’s not done. Until we’re convinced that we’re on path to that, it’s an overstatement to be counting the chickens.”
Some economists question why the Fed should cut rates soon since the economy is doing better than expected. It has avoided a recession as the economy grew by 5.2% in the third quarter.
The AUD/USD also reacted to the relatively strong Chinese economic numbers. According to the National Bureau of Statistics (NBS), the country’s industrial production and retail sales rose at a faster pace than expected in November. That is a sign that Australia’s biggest trading partner has bottomed.
AUD/USD technical analysis
The 4h chart shows that the AUD/USD pair topped at 0.6728, where it formed a small double-top pattern. It remained slightly above the important resistance point at 0.6690, the highest swing on December 4th. The pair also moved above the 50-period and 25-period moving averages.
It also retested the important support at 0.6672, its highest swing on November 29th. A break and retest pattern is one of the most popular continuation signs. Therefore, the pair will likely continue rising as buyers target last week’s high of 0.6730.
Ready to trade our daily Forex signals? Here’s a list of some of the best Forex platforms Australia to check out.