Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6540.
- Add a stop-loss at 0.6700.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6631 and a take-profit at 0.6700.
- Add a stop-loss at 0.6550.
The AUD/USD exchange rate pulled back as the US dollar rebounded. It dropped to 0.6600, the lowest level since November 11 as the US dollar index jumped by almost 1%. It has retreated by almost 3% from the highest point this month.
US dollar index (DXY) strength
The AUD/USD price continued the downward trend started on November 15 as the dollar index rallied. The greenback has gained against most currencies like the euro, British pound, and the Swiss franc.
With no economic data from Australia, the focus among investors will be on the Federal Reserve. On Tuesday, several Fed officials like Loretta Mester, Esther George, and James Bullard. Historically, these statements tend to have an impact on the US dollar.
In their previous statements last week, Esther George and Mester hinted that they will support a Fed pivot in the coming meetings. The pivot could involve lowering the size of the interest rate hike from 0.75% to 0.50%. Bullard, on the other hand, has hinted that he will support another 75 basis point rate hike.
The AUD/USD price will next react to the upcoming Fed minutes scheduled for Wednesday. These minutes will provide more information about what the officials deliberated in its meeting in October. In it, the bank decided to hike interest rates by 0.75% for the fourth straight meeting. It also hinted that rates will remain high for a while.
The pair also pulled back as commodity prices retreated. The closely watched Bloomberg Commodity Index (BCOM) declined by 35 basis points as concerns about the Chinese economy continued. In a statement, Beijing said that it had recorded the first Covid death in months.
As such, there is a lingering risk of more lockdowns in the country. The Australian dollar is often seen as a good proxy for commodities.
AUD/USD forecast
The AUD/USD pair continued the sell-off as the US dollar continued its rebound. On the 4H chart, it moved below the 25-day and 50-day moving averages. The pair also dropped into the Ichimoku cloud while oscillators like the Relative Strength Index (RSI) are pointing downwards.
It has moved below the important support level at 0.6636, the lowest point on Thursday. The pair will likely continue falling as sellers target the next key support level at 0.6520. This price is the highest point on October 27 and is also at the second support of the standard pivot point.
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