Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6620.
- Add a stop-loss at 0.6800.
- Timeline: 1-2 days.
Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6620.
The AUD/USD pair plunged to its lowest level in over a month as the US dollar index rally continued. It crashed to the psychologically important support level at 0.6700, much lower than the year-to-date high of 0.6942.
The Australian dollar has joined other major currencies in weakening against the greenback as signs of a less dovish Fed emerge and as the countdown to the US election rise.
Recent US economic numbers have been quite strong, leading some economists to predict that the Fed will not deliver more jumbo cuts. Inflation remains above the 2% target, while the labor market has started to strengthen.
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Last week’s Fed minutes showed that officials were divided on whether to cut interest rates by 0.50%. Opponents of the jumbo cut warned that it would incentivize more spending and inflation.
Therefore, the market anticipates that the Federal Reserve will focus on delivering 0.25% interest rate cuts in the next meetings.
The AUD/USD pair also dropped as polls showed that Donald Trump has a high chance of winning the November election. While Trump has advocated for a weaker dollar, analysts believe that his policies, especially on trade wars, will lead to higher risks and dollar demand.
The dollar has also risen as odds of geopolitical tensions rise. Experts believe that Israel will hit Iran’s critical infrastructure this month, a move that could lead to more demand for safe havens like the US dollar.
The Australian dollar has also fallen as the odds of the Reserve Bank of Australia (RBA) rate cut rise. In its last meeting, the bank left rates unchanged and tweaked its language. Unlike in the other meetings, the bank did not leave the door for a rate hike open.
AUD/USD Technical Analysis
The AUD/USD exchange pair continued its downward trend as the US dollar index rose. It retreated below the important support at 0.6795, its highest point in July and August.
The pair has crashed below the first support of the Woodie pivot point and the 50-day moving average. Also, the bars of the Awesome Oscillator have remained below zero in the past four days.
The two lines of the Klinger Oscillator have formed a bearish oscillator. Therefore, the pair will likely continue falling as sellers target the key support at 0.6620, its lowest point on September 11.
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