Bearish View
Sell the AUD/USD and a take-profit at 0.7195.
Add a stop-loss at 0.7340.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 0.7315 and a take-profit at 0.7400.
Add a stop-loss at 0.7250.
The AUD/USD pair slipped to the lowest level since October 7 as investors reflected on the rising US dollar and the relatively dovish Reserve Bank of Australia (RBA). The pair dropped to a low of 0.7261, which was also at the first support of the standard pivot point.
US Dollar Rebound
The AUD/USD pair’s price action is mostly because of the seemingly divergence that is happening between the Federal Reserve and the RBA.
The RBA published its closely-watched minutes on Tuesday. Like in the previous minutes, the RBA seems to suggest that most analysts were wrong about growth and inflation. In the minutes, the bank said that the earliest it will hike interest rates will be in 2024.
This happened even as recent data points to a relatively strong economic recovery. For example, home prices in Australia have jumped to the highest level on record. This trend has been helped by the historically low interest rates and the fact that people made significant savings during the pandemic.
At the same time, the labour market is starting to tighten after its turbulence during the recent lockdowns in New South Wales. Indeed, data by the statistics office showed that the country’s wage price index (WPI) rose by 0.6% in the third quarter. This translated to a 2.2% year-on-year increase.
The numbers showed that most of this wage growth was seen in white-collar jobs like lawyers and accountants. Still, this wage growth is slightly below the overall inflation.
At the same time, the US dollar has surged to the highest level in several months. This growth is mostly because of the likelihood that the Federal Reserve will embrace a relatively hawkish tone in the coming months. This is primarily because of the overall strong data from the country.
AUD/USD Forecast
The AUD/USD pair has been under intense pressure in the past few days. This pressure pushed the pair to a low of 0.7262, which was along the S1 of the standard pivot points. The pair is still below the 25-day and 50-day moving averages. The decline is also being supported by the Ichimoku cloud, which is slightly below the price. It has also moved below the 61.8% Fibonacci retracement level.
Therefore, the pair will likely keep falling as bears target the second support at 0.7195. This price also coincides with the 78.6% retracement level.
