Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6150.
- Add a stop-loss at 0.6320.
- Timeline: 1-3 days.
Bullish View
- Set a buy-stop at 0.6250 and a take-profit at 0.6325.
- Add a stop-loss at 0.6150.
The AUD/USD pair was flat near its lowest level since October 2022 as the US dollar index ended the year on a high note. It was trading at 0.6227, much lower than the 2024 high of 0.6942.
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The pair has been in a strong downtrend because of the strong US dollar index (DXY), which has risen to $108.30, its highest point since 2022. Its surge is because of the strength of the American economy and the ongoing hope that the Federal Reserve will not cut more rates than expected.
The Fed is mostly concerned that the US will see elevated inflation for longer if Donald Trump succeeds implementing his policies. Trump wants to deliver more tax cuts, impose more tariffs, and deport millions of undocumented immigrants. If he is successful, it means that inflation will remain sticky in the country.
At the same time, the AUD/USD pair has fallen as the Australian and Chinese economies continue slowing down. The most recent Chinese data showed that the economy grew by 4.6% in Q3 after growing by 4.7% in the previous quarter.
In Australia, the economy grew by just 0.3% in the quarter, its slowest level since the pandemic, meaning that the RBA may be more aggressive when cutting rates in 2025.
AUD/USD Technical Analysis
The AUD/USD exchange rate has been in a strong downward trend in the past few weeks. It has moved below the descending trendline that connects the highest swings since 2021.
The pair has moved below the 50-week and 25-week Exponential Moving Averages (EMA). It has also moved below the important support at 0.6275, its lowest swing in October 2023 and 2022. It is also below the Ichimoku cloud indicator.
The MACD has crossed the zero line, while the Relative Strength Index (RSI) falling to near the oversold level. Therefore, the pair will likely continue falling, with the next reference level to watch being at 0.6200. On the flip side, a move above the key resistance point at 0.6300 will invalidate the bearish sign.
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