Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6200.
- Add a stop-loss at 0.6375.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6325 and a take-profit at 0.6400.
- Add a stop-loss at 0.6200.
The AUD/USD pair sell-off continued after the latest Reserve Bank of Australia (RBA) interest rate decision. It also fell to the lowest level since November last year as the US dollar surged. As a result, the pair has now crashed by almost 12% from the year-to-date high.
RBA decision and DXY rally
The RBA delivered the first interest rate decision under Michele Bullock. In it, the bank decided to leave the interest rate unchanged at 4.1% for the fourth straight month. She cited the fact that the Australian economy was slowing.
Bullock also noted that Australia’s inflation remained stubbornly high. Economists now have a mixed outlook for what the bank will do in the November meeting. Some believe that the bank will hike rates by 0.25% while others expect it to continue pausing. In a note, an analyst at Capital Economics said:
“To bolster her inflation-fighting credentials, we therefore think that Bullock will deliver a final 25 basis point hike next month, with rate cuts unlikely before the second quarter of next year.”
The AUD/USD also crashed as the US dollar index continued rising. The closely-watched US dollar index (DXY) rose by 0.15% to $106.74, the highest level in months. It has jumped by more than 7% from its lowest level this year.
The dollar index rose after the strong vacancies data. According to the Bureau of Labor Statistics (BLS), the number of JOLTs job openings jumped to 9.61 million in August, higher than the median estimate of 8.8 million.
Several Fed officials supported either another rate hike or leaving rates as they are for a longer period. Loretta Mester supported another 0.25% hike while Michele Bowman and Raphael Bostic supported another 0.25% increase. All this explains why American bond yields have soared to the highest level in more than a decade.
AUD/USD technical analysis
The AUD/USD pair has been in a strong downward trend in the past few months. It has dropped below the important support level at 0.6360, the lowest level since August. The pair has moved slightly below the 25-period and 50-period moving averages. Further, the MACD has moved below the neutral point
Further, the Stochastic Oscillator has moved below the oversold level. Therefore, the outlook for the pair will continue falling, with the next support level to watch being at 0.6200.
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