Bullish View
Buy the AUD/USD and set a take-profit at 0.7340.
Add a stop-loss at 0.7200.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 0.7220 and a take-profit at 0.7150.
Add a stop-loss at 0.7300.
The AUD/USD pair tested a key resistance level on Wednesday as the US dollar weakened. The pair rose to an intraday high of 0.7270, which was the highest level since November 22. It has risen by about 3.70% from its lowest level this month.
US Dollar Weakness
The AUD/USD pair rose mostly because of the overall dollar weakness. The US Dollar Index fell by about 50 basis points on Tuesday after the latest economic data from the United States.
Data published by the American government revealed that the country’s trade imbalance increased in November. Total exports declined by more than 1% while imports surged ahead of the holiday shopping period. As a result, the country reported a record trade deficit of more than $97 billion.
Additional data from the United States showed that the country’s pending home sales numbers declined by about 2.2% last month. This was a bigger decline than the previous month’s increase of more than 7.7%. Other data published this month showed that new home sales and housing starts improved modestly in November.
Still, these numbers and the Omicron variant will likely not change the Federal Reserve outlook. In its most recent meeting, the Fed said that it will implement about three rate hikes next year. Some analysts believe that the bank will increase rates by about 100 basis points.
Later today, the AUD/USD will react mildly to the latest initial jobless numbers from the US. Economists expect the data to show that initial claims increased from 205k to 208k. They also expect the data to show that the existing claims rose from 1,859k to 1,868k. These numbers have made strong progress considering that the US had more than 10 million initial claims at the onset of the pandemic.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair formed an ascending channel this month. And on Wednesday, the pair managed to move to the upper side of this channel. It also moved slightly below the 50% Fibonacci retracement level. At the same time, the pair moved slightly above the 25-day moving averages while the Relative Strength Index (RSI) is tilting higher. It has also formed a bullish flag pattern.
Therefore, the path of the least resistance for the pair is to the upside. If this append, the next key level to watch will be the 61.8% Fibonacci retracement level at 0.7340.
