The Forex market is dominated by a strengthening US Dollar, while the Australian Dollar has continued to act one of the weakest major currencies, seemingly decoupled from risk sentiment to some extent with US stock markets recently rising to make new record highs. This is putting the AUD/USD currency pair in sharper focus over recent days, as it stops gaining new lows and begins to trade in a ore choppy fashion quite near its lows. Let’s look at the two currencies.
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AUD/USD Fundamental Analysis
The Australian dollar’s fundamentals remain supported by the RBA’s hawkish stance and persistent inflation, but fading expectations for another rate hike are limiting its upside. Near-term sentiment is cautious, as hawkish Fed minutes strengthen the US dollar and risk aversion weighs on the Aussie. China’s outlook and demand for Australian commodities remain key external drivers, while weakening domestic consumer confidence adds a headwind—leaving AUD supported by relatively high interest rates but vulnerable to dollar strength and deteriorating risk appetite.
The US Dollar remains supported by relatively high Treasury yields (10-Year now trading above 5.33%) and its safe-haven status. The US dollar’s fundamentals remain supported by persistent inflation and the Federal Reserve’s hawkish stance, with its latest minutes signalling that most policymakers still favour further tightening following September’s rate hike. Sentiment is bullish, with the dollar index trading near an 18-month high around 102.2 as investors anticipate monetary policy remaining restrictive. However, softer employment data and a low implied probability of an October hike temper expectations for immediate tightening, leaving further gains dependent on incoming inflation and labour-market figures reinforcing the case for another increase later this year.
It looks like fundamentals and sentiment is supporting a bearish case in this currency pair, albeit more weakly than they were a few days ago.
AUD/USD Technical Analysis
The key technical factor is probably the US Dollar’s sustained bullish breakout above the 101.39 area in the DXY (US Dollar Index). The Dollar now has an open path towards the next key resistance level at 103.23 if it can clear the double top at 102.17.
The price chart below shows that the AUD/USD currency pair has rebounded from the long-term low which is reached last week confluent with the round number at 0.6900. However, so far this has been a relatively weak bullish retracement reversing at 0.6990 and moving down in quite an orderly way from there over the past two days.
Overall, the outlook looks bearish over the short term, but there is a support level not far away at 0.6923 which looks likely to be strong, and this could well provide a short-term bullish bounce even if bears eventually overcome it.
A sustained break below 0.6923 would be a bearish sign and 0.6900 even more so, but these levels might well survive today.
I would be comfortable taking a short trade here today from a bearish retest and rejection at 0.69966.
AUD/USD H1 Price Chart
Support & Resistance Levels
My previous AUD/USD signal on 24th September was not triggered.
Risk 0.25%.
Trades may only be entered prior to 5pm Tokyo time Friday.
Short Trade Idea
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of $0.6966, $0.6990, or $0.7007.
Place the stop loss 1 pip above the local swing high.
Adjust the stop loss to break even once the trade is 20 pips in profit.
Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
Long entry following a bullish price action reversal on the 1H1 time frame H1H1H1 time frame immediately upon the next touch of $0.6932 or $0.6907.
Put the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Australian Dollar or the US Dollar.
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