Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6200.
- Add a stop-loss at 0.6365.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6335 and a take-profit at 0.6435.
- Add a stop-loss at 0.6250.
The AUD/USD price has fallen in the past six straight days and is trading at the lowest level since April of 2020. It has crashed by more than 13% this year and by 18% from the highest point this year. This decline happened as the US dollar index surged to the highest level in more than 20 years.
Fed and RBA divergence
The AUD/USD price has come under intense pressure in the past few days as the divergence between the Fed and the RBA. In its most recent interest rate decision, the Reserve Bank of Australia (RBA) hiked interest rate by 0.25%, which was lower than the median estimate of 0.50%.
It also hinted that the bank will slow its pace of high-interest rates since it has already hiked interest rates five times this year. On the other hand, all signs are that the Federal Reserve will continue hiking interest rates in the coming months.
Employment numbers published on Friday support this view. The numbers showed that the country’s unemployment rate dropped from 3.7% in August to 3.5% in September. Wage growth has also held relatively well in the past few months.
The next key catalyst for the AUD/USD pair will be the upcoming statement by Fed’s Patrick Harker and Loretta Mester. Analysts expect that the officials will signal that the bank will continue hiking interest rates later this month.
Their statement will come a day after Fed’s Charles Evans said that the bank will hike rates by 0.75%. His view was shared by Fed’s Vice Chair, Lael Brainard. Still, the biggest challenge for the bank is that the US could slip into a recession. In a statement, JP Morgan’s CEO Jamie Dimon said that very serious headwinds could tilt the US into a recession in the next 6 to 9 months.
AUD/USD forecast
The AUD/USD pair has been in a strong bearish trend in the past few weeks. It has moved below the first support of the standard pivot point. The pair dropped below the 25-day moving average and the lower side of the Bollinger Bands. The Relative Strength Index (RSI) has moved close to the oversold level.
The pair will likely continue falling as the US dollar strength continues. If this happens, the next key support level to watch will be at 0.6200.
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