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Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.660.
- Add a stop-loss at 0.6800.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6825.
- Add a stop-loss at 0.6600.
The AUD/USD price continued its recovery as the US dollar strength fizzled. It jumped to a high of 0.6717, the highest point since September. It has made a strong recovery after rising by over 8.6% from its lowest level this year.
Broad US dollar sell-off
The AUD/USD price has made a strong bullish recovery in the past few weeks as the US dollar strength fizzled. The US dollar index has made a deep dive recently as hopes of a Fed pivot increased.
In its monthly meeting this week, the Federal Reserve changed its statement modestly. In it, the bank said that it will maintain high-interest rates for a longer period.
The US dollar continued plunging last week after the US published the latest consumer inflation data. Official numbers showed that the headline CPI dropped from 8.3% to 7.7% in October. Core inflation also declined at a faster pace than what analysts were expecting.
Therefore, most analysts expect that the Fed will shift from implementing 0.75% rate hikes to 0.50% in the coming meetings. Several Fed officials, including Loretta Mester, Mary Daly, and Lorie Logan have supported lower rate hikes in the coming months.
Therefore, it seems like the Fed and the Reserve Bank of Australia (RBA) have converged. The RBA started pivoting in its September meeting. After delivering several 0.50% hikes earlier this year, it shifted to 0.25% in the past two meetings.
The next key data to watch from Australia will be the latest jobs data scheduled for Thursday. Economists expect that the Australian economy added 15k jobs in October while the unemployment rate remained at 3.5%. Still, these numbers will likely not have an impact on the next actions of the Reserve Bank of Australia (RBA).
AUD/USD forecast
The AUD/USD price continued rising as the US dollar strength waned. It managed to rise above the important resistance level at 0.6520, the highest point on 27th October. The pair moved above the 25-day moving average. It has also moved to the upper side of the Bollinger Bands while the Relative Strength Index (RSI) and the Stochastic Oscillator have moved above the overbought level.
Therefore, while the pair may continue rising, there is a possibility that it will have a brief pull back as sellers target the important support at 0.6520.
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