Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6550.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6550.
- Add a stop-loss at 0.6800.
The AUD/USD exchange rate pulled back from this month’s high after the Federal Reserve meeting. It initially rose to a high of 0.6685 after the decision and then pulled back to 0.6653. It remains much higher than the November low of 0.6420.
Fed and RBA to Move in Divergent Paths
The AUD/USD pair has been in an uptrend in the past few days as odds that the Fed and RBA will move in different directions rose.
The Fed slashed interest rates by 0.25% as was widely expected and predicted that it would deliver one cut in 2026. Still, a lot can change, especially now that Donald Trump will announce a new Fed Chair next year.
Indeed, the CME Fed Futures tool and top prediction markets expect the bank to cut rates two or three times next year.
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The AUD/USD pair will next react to some key economic numbers later this week, including inflation and jobs. These numbers will provide more information about the economy and hints on what to expect in the next meetings.
Meanwhile, the Reserve Bank of Australia is expected to maintain interest rates steady in the next meetings as the country’s inflation has remained stubbornly high in the past few months.
Recent data showed that the headline Consumer Price Index (CPI) jumped to 3.8% in October. With the inflation figure above the 2-3% target, officials, led by Michele Bullock, will likely maintain rates unchanged in the foreseeable future.
There will be some key economic numbers from Australia this week. For example, S&P Global will publish the latest manufacturing and services PMI report on Tuesday. Westpac will also announce the latest consumer confidence report on the same day.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has been in a strong rally in the past few months. It has jumped from a low of 0.640 in November to 0.6653 today.
The Australian dollar has jumped above the Ichimoku cloud indicator and the 50-day moving average. Also, the Relative Strength Index (RSI) has moved close to the overbought level.
Therefore, the pair will likely continue rising as bulls target the psychological point at 0.6800. This view will be confirmed when it crosses the year-to-date high of 0.6700. A drop below the support at 0.6600 will invalidate the bullish outlook.
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