Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600
- Add a stop-loss at 0.6800.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6825.
- Add a stop-loss at 0.6600.
The AUD/USD pair continued its downward momentum, falling for seven consecutive days, reaching a low of 0.6715, its lowest point since September 16. It has fallen by over 3.30% from its highest point in September.
US dollar index surges
The AUD/USD pair continued falling as the US dollar index (DXY) surged. The DXY index has risen in the last nine straight days, moving from $100.14 to $102.90, its highest level since August 16.
The US dollar index continued its strong rally after the strong jobs numbers released on Friday. According to the Bureau of Labor Statistics (BLS), the economy added over 254k jobs in September, while the unemployment rate retreated to 4.1%.
These numbers led to significant doubts about the next actions by the Federal Reserve, with many analysts expecting it to be cautious when cutting interest rates.
The case for a slower pace of cuts increased after the Fed published minutes of the last meeting. These minutes showed that the decision to cut rates by 0.50% was not unanimous as some Fed officials favored a smaller cut.
Therefore, the base scenario is where the Fed slows down the pace of cuts to 0.25% in the next meetings.
The next key AUD/USD news will be the upcoming US inflation data, which will provide more color on price movements. Economists expect the data to show that the headline Consumer Price Index (CPI) dropped from 2.5% in August to 2.3% in September.
Inflation numbers are always a big catalyst for the US dollar. However, the impact this time may be muted because the market has already priced in a 0.25% cut in the next meeting in November.
The likely catalyst for the pair will be Israeli’s response to the recent Irani attack. A severe attack will likely lead to higher oil prices and US dollar demand as traders rush to safety.
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AUD/USD technical analysis
The AUD/USD exchange rate peaked at 0.6940 in September, and has been in a strong sell-off since then. It has dropped below the first support of the Woodie pivot point at 0.6750.
The pair has also moved below the middle line of the Bollinger Bands. It has also slipped below the 50-day moving average while the two lines of the MACD have formed a bearish crossover pattern.
The Relative Strength Index (RSI) has dropped below 50. Therefore, the path of the least resistance is lower, with the next point to watch being the psychological point at 0.6600.
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