Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6650.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6650.
- Add a stop-loss at 0.6800.
The AUD/USD continues its recent upside on Tuesday morning and was hovering near its highest point since October 2024. It was trading at 0.6716, up by nearly 5% from its lowest level in November last year.
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RBA and Fed Divergence
The Australian dollar has been in a strong uptrend in the past few weeks as it became clear that the Federal Reserve and the Reserve Bank of Australia (RBA) will move in different paths this year.
The Federal Reserve delivered three rate cuts last year, and the odds of more cuts happening this year have risen. Minutes released last week showed that most Fed officials supported more cuts this year if inflation continues falling.
The meeting happened before the US released its November inflation report. Data released after the meeting showed that the headline Consumer Price Index (CPI) dropped to 2.6% in November.
Australia’s inflation, on the other hand, has remained at an elevated level. Numbers that will come out on Wednesday are expected to show that the headline CPI moved to 3.7% in November from the previous 3.8%. The Trimmed Mean CPI is expected to come in at 3.1% from the previous 3.3%, while the Weighted CPI will be 3.2%.
Australia’s inflation has remained above the 2% target, pushing the RBA to hint that it may hike rates in the coming meetings.
The AUD/USD pair has also done well in the past few months because of the elevated commodity prices. Key commodities that Australia produces, like iron ore and gold have jumped in the past few months. The Aussie is often seen as a proxy for the commodity market.
The next key catalyst for the AUD/USD pair will be the upcoming US jobs data, which will start coming out on Wednesday this week.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has been in a strong uptrend in the past few weeks. It moved from a low of 0.6421 in November to the current 0.6715.
The pair has moved above the key resistance level at 0.6705, its highest point on September 17. It has remained above the 50-day and 100-day moving averages.
The pair has formed a cup-and-handle pattern, a common bullish continuation sign. Therefore, the pair will likely continue rising as bulls target the psychological point at 0.6800.
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