Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6893.
- Add a stop-loss at 0.6700.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6780 and a take-profit at 0.6700.
- Add a stop-loss at 0.6850.
The AUD/USD exchange rate held steady at its highest point since July 2023 as hopes of a Fed and RBA divergence continued. The pair was trading at 0.6825, much higher than November’s low of 0.6270.
Iron ore price soaring
The AUD/USD pair continued soaring, helped by the surging prices of iron ore, the biggest Australian export. Data shows that iron ore price jumped to $140, the highest point since July last year.
Iron ore’s performance is a sign that the Chinese economy is doing well. China is Australia’s biggest export market. Other top commodities like copper and gold have also continued rising.
The other main reason for the Australian dollar rally is the ongoing divergence between the Federal Reserve and the RBA. In its most recent meeting, the Fed pointed to three rate cuts in 2023.
The most recent data showed that the core PCE barely rose in November as energy costs retreated. It increased by 0.1% in November after rising by a similar amount in the previous month.
As a result, US bond yields have continued moving downwards. The 10-year yield fell to 3.90% while the 30-year fell to 4%.
In Australia, the RBA expressed a hawkish tone in its recent meeting. The most recent minutes revealed that the bank considered hiking interest rates in its December meeting. Analysts expect it to hike if inflation remains much higher than the target of 2.0%.
Like in the US, Australia’s bond yields also pulled back this week. The 5-year bond yields retreated to 3.71% while the 10-year fell to 4.05%.
There will be no major market-moving data from the US and Australia on Wednesday. The only data to watch will be the latest Richmond manufacturing and services index numbers.
AUD/USD technical analysis
The AUD/USD exchange rate held steady as hopes of a Fed and RBA divergence continued. On the daily chart, it moved to the upper side of the Bollinger Bands. The Relative Strength Index (RSI) has been in an upward trend and is nearing the overbought point.
Also, the Average Directional Index (ADX) has risen to 36, its highest point since October last year. This is one of the top indicators to measure a trend’s strength. The pair will likely continue rising as buyers target the key resistance point at 0.6893.
Ready to trade our free Forex signals? Here are the best forex platform Australia to choose from.