Bearish View
- Sell the AUD/USD and set a take-profit at 0.7150.
- Add a stop-loss at 0.7300.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7260 and a take-profit at 0.7330.
- Add a stop-loss at 0.7200.
The AUD/USD pair bounced back in the overnight session as the US dollar retreated. The pair is trading at 0.7225, which is slightly above this week’s low of 0.7173.
US Dollar Retreats
The AUD/USD bounced back even after the relatively strong American housing data. According to the statistics office, building starts rose to a 9-month high of 1.7 million in November. The 1.6% increase was attributed to the rising demand for apartments rose. The commerce department noted that the numbers were pushed higher by the multifamily sector.
Further data revealed that building permits also rose in November. They rose by 9.1% from the previous month to an annualized pace of 1.87 million, the highest rate in almost a year.
These numbers send a picture that the American housing market is strong. Later today, the country will publish the latest existing home sales data. Analysts expect these numbers to show that existing home sales rose to an annualized pace of 6.44 million in November.
While the housing sector is strong, analysts expect that the sector will start to normalize later this year as the Federal Reserve starts tightening interest rates. The bank has hinted that it will implement three rate hikes later this year.
The AUD/USD pair also tilted higher as investors watched the performance of the bond market. After rising to the highest level since December, the 10-year Australian bond yield fell to 1.96% in the overnight session. The same view was seen in the United States, where the 10 and 30-year bond yields retreated.
Meanwhile, analysts expect that the strong recovery of the Australian economy will push the RBA to start tightening later this year. Data published by the Australian Statistics Bureau showed that the unemployment rate declined to 4.5% in December.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair bounced back on Wednesday. The comeback came after the pair dropped to the lower side of the ascending channel that is shown in black. It also moved slightly above the 25-day and 50-day moving averages. It also moved slightly above the 38.2% Fibonacci retracement level.
Therefore, the pair will likely resume the bearish trend and retest the lower side of the channel at 0.7170. This view will be invalidated if the price moves above the resistance at 0.7260.
