Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6800.
The AUD/USD pair remained in a narrow range and was hovering at the highest level since October last year. It was trading at 0.6700, much higher than the year-to-date low of 0.5914.
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RBA and Fed Divergence
The AUD/USD pair has been in a bull run since November this year as the US dollar index retreated and the hopes of a divergence between the Federal Reserve and the Reserve Bank of Australia (RBA) rose.
These hopes escalated after the Federal Reserve delivered its last interest rate decision of the year. It slashed rates by 0.25%, bringing the official cash rate to between 3.50% and 3.75%. Officials hinted that the bank will cut interest rates by 0.25% in the coming year.
On the other hand, the RBA left interest rates unchanged at 3.6%, where they have been at in the past few months. Officials warned that they were not in a hurry to cut interest rates as inflation remained at an elevated level.
A recent report by the Australian Bureau of Statistics (ABS) showed that the headline and core inflation remained at an elevated level in November. As a result, some analysts believe that the bank will hike interest rates in 2026.
Looking ahead, the pair will likely remain in a tight range on Wednesday as many investors remain in holiday mode. There will also be no macro data from Australia and the United States. The only data to watch will be the US mortgage rates and jobless claims numbers.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate has been in a strong uptrend in the past few weeks. It has jumped from a low of 0.6420 to the current 0.6700.
The pair has remained above the 50-day Exponential Moving Average (EMA). It has moved above the key support level at 0.6617, its highest swing on October 30.
The Relative Strength Index (RSI) and the MACD indicators have continued rising. It has also formed an inverse head and shoulders pattern, a popular reversal sign.
Therefore, the pair will likely continue rising as bulls target the key resistance level at 0.6800. A drop below the key support level at 0.6600 will invalidate the bullish outlook.
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