Bearish view
⦁ Sell the AUD/USD pair and set a take-profit at 0.6685.
⦁ Add a stop-loss at 0.6835.
⦁ Timeline: 1-2 days.
Bullish view
⦁ Set a buy-stop at 0.6770 and a take-profit at 0.6850.
⦁ Add a stop-loss at 0.6700.
The AUD/USD exchange pair pared back some of the recent losses as the recent US dollar index rally eased. After falling to 0.6700, the pair rebounded to 0.6750 as traders reflected on the Federal Reserve and RBA minutes.
Rising Australia and US bond yields
- The AUD/USD exchange rate rose slightly as Australia’s bond yields continued rebounding. The 10-year yield rose for nine consecutive days, reaching a high of 4.3%, its highest level since July 26. It has risen by over 12% from its lowest point in September.
- The same trend is happening in the United States where bond yields have rebounded. The US 10-year rose to 4.088%, while the 30-year yield jumped to 4.40%, its highest point since July 30th.
- US bond yields have risen as Federal Reserve interest rate expectations change following a series of economic data from the country. The labor market has been relatively resilient, with the unemployment rate falling from the year-to-date high of 4.3% to 4.1%.
- Inflation has also remained stickier than expected. A report released last week showed that the headline Consumer Price Index (CPI) fell to 2.4% in September, its lowest level in over three years.
However, it is still higher than the Fed’s target of 2.0%, and its decline was slower than the expected.
Looking ahead, the next key AUD/USD economic data to watch will be US retail sales and the Australian inflation indicator on Wednesday. These numbers will likely not have a big impact on the next actions by the Fed and the RBA.
Analysts expect the RBA will start cutting interest rates either in its December meeting or in the first quarter of next year.
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AUD/USD technical analysis
The AUD/USD exchange rate has been in a strong uptrend in the past few weeks. It has risen from a low of 0.6350 in August to a high of 0.6942 in September.
Recently, however, it has pared back some of these gains as the US dollar index continued rebounding. It has moved slightly below the 50-day moving average.
The awesome oscillator has moved below the neutral level, while the two lines of the MACD have formed a bearish crossover.
The pair rebounded slightly after falling to the lower line of the ascending channel. Therefore, the AUD/USD pair will likely resume the downtrend as sellers target the next support level at 0.6650.
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