Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6350.
- Add a stop-loss at 0.6550.
- Timeline: 1-2 days.
Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.6550.
- Add a stop-loss at 0.6350.
The AUD/USD exchange rate made a bearish breakout as the US dollar rebounded and after mixed economic numbers from Australia. The pair dropped to 0.6460, a few pips above 0.6435.
Mixed Australian Data
The AUD/USD pair retreated after data showed that business inventories dropped by 0.9% in the third quarter, missing analysts estimates of minus 0.2%. Companies gross operating profits dropped by 4.6% in Q3.
On the positive side, retail sales rose by 0.6% in October, higher than the expected increase of 0.4%. Building approvals rose by 4.2%, while the manufacturing PMI rose to 49.4, approaching the expansion zone of 50.
These numbers came as the Reserve Bank of Australia (RBA) considers what to do when it holds its meeting next week. Most analysts believe that the bank will leave rates unchanged and point to a cut in the first quarter of next year.
The AUD/USD pair also retreated as the US dollar index (DXY) bounced back after the better-than-expected US manufacturing PMI numbers. According to the S&P Global, the manufacturing PMI rose from 51.1 in October to 52 in November.
Another report by the Institute of Supply Management (ISM) showed that the PMI rose from 46.5 to 48.4, higher than the median estimate of 47.7. These numbers mean that the American economy was doing well, which could push the Federal Reserve to maintain rates unchanged next week.
In a statement, Raphael Bostic of Chicago Fed, noted that he was undecided on what the Fed needs to do. He is leaning towards anothe cut since inflation is on a path to 2.0%.
AUD/USD Technical Analysis
The AUD/USD pair continued its downtrend as the greenback strengthened. It has formed a bearish pennant pattern, a popular bearish continuation pattern. This pattern is made up of a vertical line and a symmetrical triangle.
The pair has formed a death cross as the 200-day and 50-day moving averages crossed each other. Also, the MACD indicator has moved below the zero line, while the Relative Strength Index (RSI) moved below 50.
Therefore, the pair will likely continue falling as sellers target the next key support at 0.6350, its lowest swing on August 5.
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