Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.7000.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.700.
- Add a stop-loss at 0.6800.
The AUD/USD exchange rate gapped upwards, reaching its highest point since February 2023 as investors dumped the US dollar and moved to gold and other assets. It surged to a high of 0.6925 as traders waited for the upcoming Federal Reserve interest rate decision and Australian inflation data.
Australia Inflation Report and Federal Reserve Decision
The AUD/USD exchange rate rose and the US Dollar Index plunged to the lowest level in months as focus shifted to the upcoming US government shutdown.
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Odds that the government will go through a shutdown jumped after an incident in which a border patrol agent shot and killed an American citizen.
The AUD/USD exchange rate jumped ahead of the upcoming US consumer confidence data by the Conference Board. Economists expect the upcoming reports to show that confidence rose slightly in January as inflation fell and the labor market improved.
The pair continued rising as traders waited for the upcoming Australian inflation report on Wednesday morning. Economists polled by Reuters expect the report to show that the headline and core inflation numbers remained above 2% in December.
The Australian inflation report comes as odds of a Federal Reserve and Reserve Bank of Australia (RBA) divergence rose. Economists expect that the RBA will hike interest rates while the Fed will resume cutting rates this year.
The AUD/USD pair will also react to the upcoming Federal Reserve interest rate decision, which will come out on Wednesday. Economists expect the bank to leave rates unchanged between 3.50% and 3.75%.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate has been in a strong bull run this year as the odds of a Fed and the RBA divergence rose. It recently moved above the important resistance level at 0.6710, its highest level on September 17.
The pair has remained above the 50-day and 100-day Exponential Moving Averages. It also rose to the oversold level of the Murrey Math Lines.
The Relative Strength Index (RSI) and the Stochastic Oscillator have moved to the overbought level. Therefore, the pair will likely retreat in the coming days as sellers target the key support level at 0.6800.
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